When you take out a car loan or lease, the agreement you sign usually contains language that allows that creditor to keep title to the car and take back the vehicle if you default on the agreement (usually by failing to make payments). There are two ways that a creditor can legally regain possession of your vehicle: repossession and replevin.
Read on to learn the difference between repossession and replevin, and how each works.
If you default on your car loan, by far the most common way creditors take cars back is through repossession. Repossession is a self-help remedy available to creditors that allows them to simply take possession of the car; the creditor does not have to sue you first. Most states allow creditors to come onto your property and take the car, even without giving you advance notice. However, a creditor cannot repossess your car if it would contribute to a potentially violent situation or breach the peace.
(To learn more about repossession, see our Repossession of Cars & Personal Property topic page.)
Once the creditor has taken possession of the vehicle, it has a choice of either keeping the car or selling it. The creditor can sell the car at a public auction or private sale. Most states require the creditor to send you written notice of the sale. You may even be able to attend the sale and bid on the car yourself, although creditors frequently dispose of repossessed cars through closed dealer's auctions.
If the car is sold for less than what you owe on the balance of the loan or lease, then the creditor may sue you for the difference in court (this is called a deficiency). (To learn more, see Deficiency Balances After Repossession.)
If the creditor cannot repossess the vehicle without breaching the peace (for example, your car is in a locked garage), it may then seek help from the court through a process called replevin. With a replevin lawsuit, the creditor seeks an order from the court requiring you to give the car back to the creditor.
If you fail to abide by the court order, you may be subject to both civil and criminal penalties. The car loan lender may also get a money judgment against you, usually for the balance owed on the loan or lease, along with charges and costs.
Unlike with a repossession, you are entitled to some due process before the creditor can take the car through a replevin proceeding. This means you are entitled to the following:
written notice of the creditor's intent to obtain an order of replevin
an opportunity for a hearing
written notice of the time, date, and location of the hearing, and
the right to dispute or respond to the complaint.
The time period within which you may initially respond to the complaint and request a hearing varies by state, but is typically short. For example, Ohio law requires you to file a written response and request for a hearing within five days of receiving the notice. Therefore, it is important that you act quickly to protect your rights.
To find information about the specific procedures in your state, do some research on your own (visit Nolo’s Legal Research area), contact your state attorney's general office or state consumer protection agency (see State Consumer Protection Offices to find yours), or consult with a local attorney.