When a vehicle is leased or financed, the vehicle’s lien holder is granted certain rights over the property. The lien holder can repossess a vehicle if the purchaser violates a predetermined agreement and fails to make timely payments. The Alabama state legislature has outlined car repossession laws to help avoid misunderstandings between lien holders, recovery agents and debtors.
Payment Default
In Alabama, a lien holder (finance company) cannot initiate any collection attempts, including repossession, until the debtor has defaulted on a payment. The lien holder can first make a reasonable attempt to collect payment. If that fails, the vehicle can be seized. Debtors in default should contact the finance company and attempt to establish a repayment plan which incorporates past due amounts.
Voluntary Repossession
Debtors who are seriously delinquent can arrange for voluntary repossession. The vehicle can be picked up by a tow truck or returned to the original dealership. You can avoid the embarrassment of having the towed away in the middle of the night and also save on expensive repossession charges.
When a consumer buys a car on credit, until she makes the last payment, the seller keeps important rights to the car. One important right is the right to repossession. The most common example is when a person stops making payments, and the seller repossesses the car. Alabama Code Title 7, Section 9A governs transactions like car sales and other repossession issues. Because these provisions are often in the contract, the buyer consents to the repossession in the event she stops making payment. In that respect, repossession is voluntary.
Involuntary Repossession
Involuntary repossession typically involves a recovery company bringing a tow truck to the debtor’s home. Lien holders in Alabama have the right to seize vehicles at any point after an account has gone into default. Alabama laws prohibits a recovery agent from taking any action which can be construed as a breach of peace. This includes breaking into locked garages, and starting loud arguments that can cause neighborhood disruption.
Selling the Vehicle
Once a vehicle has been recovered the lien holder may sell it at a public or private sale. The debtor must be notified 10 days prior to the sale to retrieve any personal property from the vehicle. If the vehicle is sold for less than what the debtor owes, the debtor is still responsible for the balance.
Most of us have at one time or another been late on a payment or two. If late payments have caused you to face the possibility of having your car repossessed, knowing your options is important. The state of Alabama has certain laws that are designed to protect the rights of consumers in regards to vehicle repossession. Banks and repossession companies must comply with these laws or face tough financial penalties or other legal ramifications.
Terms of Contract
According to Alabama law, even if the debtor is only one day late, the bank or lending institution that holds a lien on the vehicle has the right to repossess. The bank or lending institution does not have to provide you with any sort of extra time to make your payment before repossession. If, however, your purchase contract has a grace period built into the terms of the payment structure, the bank or lending institution may not repossess the vehicle until you are at least one day past the grace period specified in your contract.
Lawful Transaction
Under Alabama law, the bank or lending institution or any agency acting on its behalf must not violate the law in order to repossess the vehicle. The bank, lending institution or professional repossessor must not violate the peace in any way. He or she can not use violence or the threat of violence in order to repossess the vehicle. Additionally, the repossessor and lending institution must act truthfully. He or she may not lie to you by advising you to bring your car in for repairs or the like in order to trick you to gain access to the vehicle for repossession. All transactions must be done in accordance with the law. If a bank, lending institution or anyone acting on their behalf violate any of the mentioned terms, the bank may be ordered to pay restitution to the debtor or forfeit any rights to reimbursement for profits lost due to costs incurred.
Personal Property
If a vehicle is repossessed with personal items belonging to the debtor inside, the items must be returned as soon as reasonably possible. Valuables such as money, jewelry and the like that may have been left in the vehicle are not subject to sale in order to recover any costs incurred by the bank or lending institution for money owed. Sale of these items would constitute theft and the bank, lending institution or anyone acting on its behalf would be subject to criminal punishment according to Alabama state law.
Right To Redeem
The debtor must be notified of his or her right to redeem the vehicle. The right to redeem means that the debtor has the right to pay the amount due in order to retrieve the vehicle and prevent it from being sold. If the bank or lending institution fails to notify the debtor in writing of his or her rights to redeem the vehicle and the amount due in order to do so, the creditor is in violation of the law and is subject to fine. If the debtor chooses not to redeem the vehicle, any profit that is made upon the sale of the vehicle, less any balance due and costs incurred, must be paid to the debtor. If the bank or lending institution sells the car for less than was owed, the creditor is then responsible for the balance due.
Repossessions occur when car buyers obtain vehicle loans to finance their car purchases. In exchange for the loan proceeds, banks retain their ownership rights to their security interests. When car buyers default on their loan agreements, banks typically have legal rights to reclaim their security interests or collateral after one missed payment. State laws determine what recourse buyers may have against repossession agencies hired to repossess vehicles for banks.
Alabama Consumer Credit Rights
Under Alabama law, creditors must provide consumers with two copies of all signed documents signed during the loan application process. Furthermore, loan documents must contain a consumer protection provision, in all capitalized letters, warning consumers to review their loan agreements prior to signing them.
Contractual Rights
Alabama allows credit agencies to insert acceleration agreements in their contracts providing them with the right to demand full payment of the remaining loan balance when borrowers default on their loan agreements. In addition to requiring car buyers to pay any remaining loan balances after banks sell their vehicles, the state’s statutory code allows them to request repayment of repossession costs. However, when borrowers obtained original loans that were less than $1,000, then, under state law, they are not personally liable for any remaining deficiency after repossession and sale.
Repossession Notifications
Repossession agencies must notify car buyers of scheduled sales. Although some states provide consumers with a redemption period allowing them to cure their deficiencies in exchange for a return of their vehicles, Alabama does not. Debtors do not have rights of redemption, and as long as owners provide car buyers with notification of private or public sale, then they have satisfied their notification obligations.
Breach of Peace
Alabama law allows banks to reclaim their vehicles upon buyers’ default on their loan obligations through judicial or nonjudicial methods. Judicial methods allow banks to obtain court orders prior to seizing their vehicles. Nonjudicial methods allow banks to hire third-party repossession agencies to reclaim vehicles on their behalf. As long as those repossession agencies do not violate public policy laws by using force or destroying property, then banks may engage them to repossess vehicles used as collateral for their loan proceeds.
Rights
Car loans typically are structured to allow the lender to take the vehicle back if the buyer stops making payments. Alabama Code 7-9A-601 outlines the rights of the seller, buyer and financer (usually a third party bank). A seller may seek a judgment, foreclose or exercise his rights the parties previously agreed in the sale contract. Pursuant to this subsection, the buyer has only the rights agreed to in the sale contract.
Expenses
Alabama Code 7-9A-607 states that a seller may take “commercially reasonable collection and enforcement” measures to repossess the item to satisfy its debt obligations to the creditor. In addition, the seller may also recover “reasonable expenses of collection and enforcement.” Alabama laws allow the lender to begin efforts to retake the car before a buyer is in default if the buyer consented to that in the loan agreement.
Repossession
Alabama Code 7-9A-609 provides that a seller may take possession of the collateral (or car) through judicial or non-judicial process. A non-judicial process is similar to having a tow truck seize the automobile. However, if the seller elects to proceed via a non-judicial process, he must do so without disrupting public order.
When a vehicle is leased or financed, the vehicle’s lien holder is granted certain rights over the property. The lien holder can repossess a vehicle if the purchaser violates a predetermined agreement and fails to make timely payments. The Alabama state legislature has outlined car repossession laws to help avoid misunderstandings between lien holders, recovery agents and debtors.
Disclaimer
This article is intended to give a basic overview of Alabama repossession laws. It is not intended to give legal advice. To determine how the facts of your situation apply to Alabama law, consult a qualified attorney licensed to practice law in the state of Alabama.
