If your car loan lender repossesses your car, you probably are not entitled to any notice prior to the repossession. However, in most states the car lender must provide you with certain notices after the repossession. Read on to learn about what your car lender must tell you after the repossession and after the car sale.
(To learn more about car repossession, including when a lender can repo your car, the typical process, and what happens afterwards, see our Repossession of Cars & Personal Property topic area.)
No Notice Before Repossession
Most states allow car loan lenders to use repossession as a self-help remedy if you default on your car loan. Courts and law enforcement do not normally monitor the repossession process as it is happening. You may not even know when or where the car will be repossessed. Most states do not require car loan lenders to give debtors any kind of notice before they repossess the vehicles.
Even though lenders usually do not have to provide notice to you before the repossession, in many cases they have to inform you about certain issues regarding the repossession after it occurs.
In most states, the bank must notify you, in writing, of the following matters within a short time, usually five days after it has repossessed the car but before it is sold or auctioned:
Notice of Default and Right of Redemption/Right of Reinstatement
The lender must provide you written notice of your right of redemption and/or right of reinstatement. It must tell you:
the amount of the outstanding balance of the loan, including all fees and charges
the deadline to redeem the loan
the method by which you can redeem or payoff the loan to get the vehicle back, and
if your state allows for the right of reinstatement, the amount necessary to bring the loan current and the steps you need to take to reinstate that loan.
Notice of Sale
In the event you do not reinstate the car loan or redeem the car, the lender is also required to send you a written notice if it intends to sell the vehicle (this may be combined with the first notice, above). Usually, this notice must contain the following information:
if the car is being sold at a private sale, the date of the intended sale
if the lender intends to sell the car at a public auction, it must notify you of the time, date and location of the auction (this gives you the opportunity to bid on the property or bring your own bidders)
an explanation of your liability if you owe a deficiency balance after the sale
a description of how you can obtain an explanation of how the proceeds of the sale are applied to your debt obligation
a description of how you can obtain an explanation of how the lender calculated your debt obligation, and
contact information to find out more information about the upcoming sale.
You are entitled to receive the sale notice within ten days of the sale.
If the car is sold, the lender must provide you with an accounting of how the proceeds of the sale were applied against your debt. Most states allow the lender to apply the sale proceeds as follows, in this order:
reasonable costs and expenses of repossessing, storing, and disposing of the vehicle, along with reasonable attorney fees (if the loan agreement allows them), and
the balance of the loan.
If the sale amount doesn't cover the loan balance and costs. If the amount of the sale is not sufficient to cover all of these items, then you owe what is called a deficiency balance. The creditor must notify you of the amount of that deficiency. Normally, if you don't pay the deficiency, the creditor may take further action, such as suing you for the balance. (To learn how the car loan lender can collect the deficiency, see our How Creditors Collect topic area.)
If there is a surplus. If the creditor recovers more than what's owed on the obligation from the sale, then there is a surplus balance. The creditor must give you an accounting of the surplus and pay it to you. There is one exception: If you there is a co-signor and the loan agreement gives the co-signor rights to the surplus, the creditor must pay the surplus to the co-signor.
However, surpluses are not common in car repo sales because the vehicles are typically worth much less than what is owed on loan contract.
Getting Information About Repossession Notices in Your State
To find information about repossession laws and notices in your state, you can do some research on your own (visit Nolo’s Legal Research area), contact your state attorney general office or state consumer protection agency (seeState Consumer Protection Offices to find yours), or consult with a local attorney.