When a debtor fails to pay installments on a car loan, an auto lender may have no choice but to repossess the vehicle. Alternatives would be to refinance the loan or to allow the debtor to repay the money owed in a lump sum at a later date. However, the debtor must have a history of reliably making payments before the lender considers those options. Repossession is the surest way to recover money after the debtor defaults on a loan, though the lender may still not recover the entire loss. When repossessing a vehicle, you must follow a legal process that gives the debtor notice and a chance to repay you.
What Allows Repossession
Your right to repossess the vehicle should be clearly stated in the loan contract. Loan agreements typically include security interests, which are properties that can be used as collateral in case the debtor fails to pay the loan. In a contract for a vehicle payment plan, the vehicle is the security interest. When a debtor does not make a scheduled payment, he or she has violated the contract. The security interest identified in the contract will legally allow you to repossess the vehicle as collateral.
Repossession Process
Once you have decided to repossess a debtor’s vehicle, you must deliver a Notice of Redemption to the debtor that:
If the vehicle is for personal use, the debtor must also receive an Affidavit of Defense. After the notices have been delivered, you can use a licensed repossession service to retrieve the vehicle. However, the debtor can put a temporary stop on repossession if he or she filed for bankruptcy protection before the repossession.
Selling the Vehicle
Illinois requires auto lenders to wait 21 days after sending out the Notice of Redemption before they can resell the vehicle. This gives the debtor a chance to:
If 21 days pass without the debtor taking action, you can submit an Affidavit of Repossession, which will permit you to reach a new agreement to sell the car.
Debt Collection
In some cases, the money that you receive from reselling the car will be less than what the previous debtor owed from the loan. A Chicago creditor’s rights attorney at Dimand Walinski Law Offices, P.C., can help you take legal action to retrieve the remaining debt from the debtor. To schedule an appointment, call 312-704-0771.
