If your car was repossessed for missed payments, you may quickly learn that state and federal laws in this area can be quite complicated. Here are five tips on getting a car back after repossession in Massachusetts.
Tip 1 – Act Quickly
In Massachusetts, car lenders are only required to hold a repossessed vehicle for 20 days before reselling it. After this brief holding period, a lender can sell the vehicle. If the sales price does not satisfy the full balance owed plus the costs of repossession, then the lender can also seek to collect the remaining balance owed from you. This is called a “deficiency balance.” As a result, if the vehicle is sold at repossession you will not be able to get it back, and you might also still owe money on it.
This 20-day limit gives you a very short time period to determine your options and make the best choice on how to proceed, so it is crucial that you not delay in taking action.
Tip 2 – Contact Your Lender To Discuss Options
A good starting place is to contact your lender to see what they want in order to release possession of the vehicle back to you. Massachusetts law allows lenders to request payment of the entire loan balance plus the costs of repossession, which will simply be unaffordable for most people. Some lenders, however, might be more willing to work with you and will only ask for the past due amount plus repossession costs.
If the amount requested by your lender is unaffordable, then you will need to quickly determine a strategy to get the vehicle back.
Tip 3 – Consider A Chapter 13 Bankruptcy
One important difference between a Chapter 7 and a Chapter 13 is that consumer debtors in Chapter 13 are entitled to retain possession of their property. This is not necessarily the case in a Chapter 7. As a result, if you are trying to regain possession of a repossessed vehicle in bankruptcy, this might only be an option for you in a Chapter 13 bankruptcy.
In most cases, a turnover request for a repossessed vehicle is handled quickly and informally. Our office will typically contact the car lender to let them know that a bankruptcy case has been filed, and that we are requesting that they return possession of the vehicle. In response, most lenders will ask for proof that the vehicle is insured. Once that is confirmed, most lenders will typically agree to return possession of the vehicle to our client.
However, it is currently unclear if this will continue to be a common practice due to a recent decision by the U.S. Supreme Court in City of Chicago v. Fulton, 592 U.S. __ (2021).
The filing of a bankruptcy case results in an automatic stay (or prohibition) of virtually all collection efforts against you or your property. The automatic stay is governed under 11 U.S.C. § 362, which contains several different, specific prohibitions.
At issue in City of Chicago v. Fulton was whether a car lender’s refusal to return possession of a vehicle that had been repossessed before a bankruptcy filing violated § 362(a)(3), which prohibits a creditor from taking any act to exercise control over a debtor’s property. The Court unanimously decided that the “mere retention” of a repossessed vehicle by a car lender does not violate this law.
No other sections of the automatic stay statute were considered, though. And even though Justice Sotomayor agreed with this unanimous decision, she authored a concurring opinion suggesting that this same conduct by a car lender might violate other sections of the automatic stay statute, specifically sections 362(a)(4) and/or 362(a)(6). Section 362(a)(4) prohibits a creditor from taking any act to create, perfect, or enforce a lien against property, and section 362(a)(6) prohibits a creditor from taking any act to collect, assess, or recover a claim against a debtor.
Because the Supreme Court’s decision did not consider these separate sections of the law, a lender might still violate these sections of automatic stay if they refuse release possession of a repossessed vehicle after a bankruptcy case is filed.
The Supreme Court also noted that the Bankruptcy Code has a separate law (section 542) that concerns turnover of property. Unfortunately, as noted in Justice Sotomayor’s concurring opinion, if a lender refuses to turnover possession immediately and requires a formal turnover action in the Bankruptcy Court, this process can take weeks or months.
It is currently unclear how lenders will react to the Supreme Court’s decision in this case, but based on Justice Sotomayor’s concurring opinion we are hopeful that turnover agreements in these circumstances will continue to be quick and amicable. If not, we anticipate that there will be more lawsuits concerning these other sections of the automatic stay law. And our office prides itself on aggressively enforcing these automatic stay rights.
Tip 4 – If The Repossession Was Illegal, Consider A Lawsuit
In conducting a repossession, there are also a number of steps that most car lenders must take and laws that must be complied with.
Most importantly, these include a written notice at least 21 days before a repossession stating the amount owed to bring the loan current and prevent a repossession. If you’ve fallen behind on payments in the past and received this notice, though, please note that lenders are only required to send this notice three times. If this is your fourth time falling behind on payments, then you might not be entitled to receive this notice.
In conducting a repossession, lenders must also not breach the peace, and if the vehicle is ultimately resold after a repossession, it must be sold in a commercially reasonable manner. These are only some of the many requirements.
If your vehicle was illegally repossessed, then you might also consider filing a lawsuit for this. Unfortunately, though, in many cases a lawsuit may not be helpful to obtain an immediate return of the vehicle.
In order to obtain a turnover of possession of a repossessed vehicle in a lawsuit, you’ll need to obtain a court order for this. Generally speaking, even if the most extreme circumstances, a court may be reluctant to provide this relief.
In order to obtain a temporary or permanent injunction preventing a repossession sale, the court will likely require you to show that money would never be sufficient to compensate you for an illegal loss of the vehicle. This will often be the case for real estate, as each parcel of property is presumed to be inherently unique. Vehicles, however, are not. As a result, a judge might conclude that if the repossession is ultimately found to be illegal, then an award of money in the amount necessary to replace the vehicle would be sufficient.
Additionally, an order preventing a repossession sale from occurring is not the same as an order requiring turnover of possession. A judge might be quite reluctant to provide this type of additional relief.
As a result, a lawsuit might be helpful to obtain money as compensation for damages from a wrongful repossession, but it may not necessarily be helpful in trying to regain immediate possession of the vehicle itself.
Tip 5 – Call An Attorney
Each situation is different, and as you can see the state and federal laws concerning post-repossession rights can be quite complicated. As a result, you’ll want to consult with an attorney experienced in handling these matters.
Brine Consumer Law is Worcester’s only law firm exclusively dedicated to fighting consumer debt in all three key areas: bankruptcy, debt defense lawsuits, and collection violations. Helping people fight debt and debt-related problems is all we do. Contact us today to discuss your options.