Illinois has adopted the Uniform Commercial Code when it comes to sales and secured transactions. The purchase of an automobile is typically a secured transaction because the car acts as collateral for a third party creditor who lends the purchaser money to buy the car. A creditor must follow certain procedures under Illinois law to repossess the car. In addition, the creditor can only repossess under certain circumstances.
Security Interest
A creditor must retain a security interest in the automobile to repossess it. To have a valid security interest, the parties must clearly state in the sales contract that the creditor retains a security interest in the automobile in case the borrower goes into default (stops making payments). Without a provision stating that, the creditor cannot repossess the automobile without a court order.
Effects
If a borrower defaults and the creditor repossess, the borrower loses possession of the automobile. Repossession will have negative effects on a borrower’s credit. In addition, the creditor has additional rights in the situation. A creditor may resell the automobile and go after the borrower if the creditor does not get all the money it lost by reselling the car. Finally, the borrower is also liable for any costs and reasonable attorney’s fees the creditor incurs because of the repossession.
Redemption
If the borrower has paid 30 percent of the automobile loan prior to repossession, the creditor must send the borrower a notice granting the borrower 21 days to redeem the automobile. The creditor must send that notice within three days after repossession. To redeem the automobile, the borrower must pay all the past due payments, any late charges and reasonable costs the creditor incurred. The borrower can only use this method of redemption one time. The only other way to redeem the vehicle is if the borrower can pay off the entire loan before the creditor resells the automobile.
Warning
Contact a qualified attorney licensed to practice in Illinois to find out how the facts of your situation apply to Illinois repossession laws, which are subject to change.
Illinois law allows creditors to repossess vehicles or other items when debtors default on paying back loans. Creditors may only repossess an item if the debtor ceases paying the loan on that item and must send debtors several legal notices prior to attempting to repossess the item. Debtors can slow the repossession or resale process by objecting in writing and presenting evidence as to why the item should not be repossessed.
Allowable Repossession
In Illinois, creditors may only repossess items in which they have a security interest, as evidenced by the title of the vehicle, loan document, contract or other written agreement. Creditors can only repossess items if the debtor defaults on that particular debt. For example, if a person has a home loan and auto loan through the same lender, the lender cannot repossess the auto if the debtor defaults on the home loan.
Personal Property
If a creditor repossesses a vehicle, he must return personal property stored in the vehicle when asked. Refusal to return personal property not relevant to the item being repossessed is considered theft in Illinois. The seller is not obligated to return personal items if the debtor does not ask for them, according to Illinois Pro Bono.
Breaching the Peace
Creditors may not disturb the peace to repossess items. They may not verbally or physically threaten the debtor or destroy other property, e.g., break down a garage door. If a debtor verbally objects to the repossession, or refuses to unlock a garage so the repossessor can reclaim a vehicle, the repossessor may wish to involve law enforcement in the repossession so there is no question of improper practices.
Affidavits and Notifications
When a creditor repossesses a vehicle or other item, he must send the debtor an Affidavit of Defense within three business days. The debtor then has 21 days to respond to the repossession. If he mails the Affidavit within this time frame, the creditor must take him to court to settle the issue. The creditor may not re-sell the item until the court case is settled.
If the debtor has already paid 30 percent of the total sale price of a vehicle at the time of repossession, the creditor must also send her a special notice to redeem the vehicle within three business days of the repossession. The debtor can get the vehicle back if she pays all past-due amounts within the next 21 days and pays any late fees and storage fees. A debtor may take advantage of this policy only once in the lifetime of the loan contact, e.g., if she got the car back from repossession in this manner the prior year, she may not do so again.
Resale of Items
After the 21-day period for contesting the repossession has passed, the creditor may re-sell the item. The proceeds from the sale go towards the balance the debtor owes on the item. If the sale does not completely cover this balance, the debtor is liable for the difference. The creditor must give the debtor advance notice of the sale. The debtor may attempt to repurchase the item at the sale if he wishes. The creditor may not sell the item for an unreasonably low price.
No Prior Notices
Illinois law does not require the seller to send any notices prior to repossessing a vehicle. At the time of the original sale, the seller must clearly outline the terms of sale, including the right to repossess the vehicle if the buyer defaults on payments, in the sales contract. The seller must also register its lien with the Illinois Secretary of State. If he does not do so, the state of Illinois considers the lien “imperfect” and does not allow the seller to repossess the vehicle without a court order.
The rights of an individual in Illinois whose car has been repossessed will depend upon the amount of money owed on the vehicle and the time frame involved in the repossession. Following a repossession, any action to retrieve the vehicle or to begin a defense against the repossession must be taken within 21 days. Legal representation may be necessary if an individual wishes to argue a repossession.
Rights For First 21 Days
An individual has the right to reclaim a repossessed car in the state of Illinois anytime in the first 21 days after repossession, provided that over 30 percent of the entire purchase price of the vehicle already has been paid. To reclaim a vehicle in this circumstance, three conditions must be met.
Conditions For Reclaiming Car
An individual who has paid over 30 percent of the car’s purchase price has the right to reclaim the car only if all past due payments are paid in full until the vehicle contract is current; any late charges are paid in full; and the costs involved in the repossession are fully reimbursed to the creditor.
Rights 21 Days After Repossession
If the debtor does not take action to retrieve the repossessed vehicle or to argue the repossession during the first 21 days post repossession, the creditor will normally sell the vehicle to recoup some of the money owed. Proceeds from this sale will be applied to the debt. The creditor is legally required to mail a notice of intent to transfer the vehicle title to the creditor so that the vehicle can be sold. The creditor also must provide the debtor with an affidavit. If the debtor wishes to argue the repossession, the debtor must complete the affidavit form and return it to the creditor within 21 days after the receipt of the form. The completed affidavit will allow the debtor to halt the sale of the vehicle until the matter is decided in a court of law. If the affidavit is not completed and returned within 21 days after receipt, the debtor relinquishes any legal right to the vehicle and the creditor can transfer the title and sell the vehicle.
Advisement of Rights
When a creditor initiates a repossession, the rights of the debtor must be communicated to the person. Creditors who repossess a vehicle are allowed a maximum of three days after the repossession to provide debtors with a written communication advising them of their rights in regards to the vehicle.
Illinois Legal Advocate: Repossession
Illinois Pro Bono: Repossession Laws
