Money & Debt

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Understanding car repossession

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If you took out a loan to buy a car, or if you lease a car, you need to make payments on time and comply with your agreement. Your car is the collateral for the loan. Read more about taking out a car loan. Car loans are known as retail installment contracts.

If you do not make your car payments on time, or if you violate your loan contract, the company that gave you the loan has a right to take the car back from you. This is called repossession.

Lenders do not have to provide you notice before seizing your vehicle. Repossession can occur after only one missed payment, depending on what your contract says. This means the lender can have someone tow your vehicle without the need for any court involvement or prior warning.

You may be able to avoid repossession by entering into an agreement with the lender, but make sure any agreement is in writing.

Breaching the peace

The repossession company is not allowed to enter your house or garage to take your vehicle unless you give them permission. However, if the car is located outside on your property, such as in the yard or driveway, or parked on the street, they are permitted to repossess it. Additionally, they can seize the vehicle from public areas. If the repossession agent shows up at your house, they may not “breach the peace” to obtain the vehicle. If they breach the peace, that may be a legal defense to the repossession.

Notice of repossession

After repossessing your car, the creditor must send you a notice of the repossession and an Affidavit of Defense within three days. The Notice of Redemption tells you whether the creditor will keep or sell your car. It also tells you if you have a right to buy back your car. The Affidavit of Defense will let you explain why you did not make payments on the car, and explain any defenses you have to the repossession. Read more about responding to a repossession using an Affidavit of Defense.

If you mail this affidavit to the lender via certified mail within 21 days, the lender cannot promptly obtain the title from the Secretary of State. The lender must then go to court to get approval from a judge that they were entitled to tow the car.

Getting your car back

If you pay at least 30% of your loan, you’ll have the options to:

• Redeem, which means you pay the balance and all fees to get your car back,
• Reinstate, which means you catch up on your missed payments and all fees and continue paying the loan, or
• Purchase the car.

You must use these options fast, or your car may be sold in as few as 21 days.

Getting your personal property back

The repossession agent must make a list of your belongings that they found in the car. They must then give you a notice within five days that tells you how to recover your items. If you do not claim your items within 45 days of that notice, the repossession company can decide what to do with your property. They must keep this list for two years.

Use our EasyForm to fill out a letter to the repossession company to demand your property.

Note: if a licensed repossession agency thinks your car’s computer has your personal information in it, they must delete that information from the car’s system before selling it.

After the car is sold

Even if your car is sold, you may still owe money to the creditor. In most cases, selling your car doesn't cover the loan. The creditor may try to collect the difference from you by suing you. This is called a “deficiency.”

Example: If you owe the creditor $10,000 and the car was sold for $5,000, you still owe the remaining balance of $5,000 from you and the lender may try to collect it. The lender has only four years to file a lawsuit against you for this deficiency debt, starting from the date of your first missed payment.

In rare cases, a car is sold for a value higher than the money owed to the creditor. The money left over from the car's sale is a surplus. You have the right to collect the surplus.

The lender has to conduct the sale in a commercially reasonable manner, but this does not mean that they will receive the full market value for the car. If they do not hold a fair auction for the car, you can raise that as a legal defense to the repossession.

A co-signer is responsible for late payments on a loan or lease for a car that is repossessed.

Unlawful repossession

Below are some examples of illegal repossession:

• The car was not collateral for the loan. The creditor cannot repossess your car if it wasn't listed as collateral for the loan or lease or the creditor does not have a valid security interest under the law. For example, the repossessed car may not be in the debtor’s name, or the creditor took the car as collateral on an earlier loan, but not on the present defaulted loan Read the details of your contract to find out if your car was used as collateral. The contract must list the car and you as the owner to be repossessed properly.
• The repo agent was violent or destroyed your property. The repo agent cannot take your car if you object in person at the time of repossession. The repo agent cannot use violence or threats, and they cannot break into a locked garage or destroy your personal property to take the car.
• You were not in default at the time of repossession. You may not be in default if the creditor regularly accepted your late payments without objection. The creditor must give you fair warning that payments must be made on time before the car can be repossessed for late payment.
• You didn't get proper notice. You have the right to buy your car back after repossession. Sometimes repossession is unlawful if the creditor doesn't give you enough notice. For example, the creditor must give you at least 21 days to buy back, or redeem, your car after repossession.
• The police helped repossess your car. Unless there is a court order, the police may never assist creditors or agents in taking your car.

If you believe that your car was repossessed or sold unlawfully, you can bring a legal claim against the lender. See if you can get legal help. Wrongful repossession may be a violation of the Illinois Commercial Code, or an unfair practice under the Illinois Consumer Fraud Act. If you believe that your personal property was stolen, you can bring a legal claim against the repossession company that towed the car. [cite] Make sure to keep detailed documentation in case your matter goes to court.

In addition to filing a legal claim in court, you can also file a complaint with the Illinois Attorney General’s office.