With this publication, you’ll understand the steps to repossess a car from a family member the right way. Perhaps, you allowed your family member to buy your car after you upgraded to a new model. They agreed to pay $350 a month, then you added them in the title. Unfortunately, they now owe payment for 4 months and have refused to return the car.
This problem can be fixed without making any legal errors, only if you follow this guide.
How to repossess a car from a family member
Taking possession of your can from a family member can be a little challenging. Just do the following:
1. Prepare the initial written contract
Make sure you already have a valid written contract in place for the repossession to be enforceable. The contract terms must be clear to prevent the law from ruling in favor of your family member—just make sure the language is not ambiguous.
Your contract must also spell out your right to repossess the vehicle in case of a default. Usually, the contract must define the following:
Specify your right to repossess if the family member is late with their payment.
If you’re to notify the family member about a default, your contract should state that you have to issue a warning or notice of default before you can repossess the car.
c. Grace period
Your contract should indicate if you would allow a grace period for late payments.
You also need a security interest. A security interest creates the collateral for your loan, and your right to repossess the car. Thus, the contract needs to include language creating a security interest in the car because it is the collateral.
Finally, the repossession provision must be clearly defined. The contract must notify your family member that you can repossess the car in the event of failure to pay on time. Make sure to follow your local law to ensure the proper use of language when creating a security interest in the car. Otherwise, you may lose the right to repossess the car.
2. Find the car and gather paperwork
It may not be difficult to find the car since you sold it to your family member, who could be your cousin, sister, and aunt, to mention a few. You should locate the car at their workplace or house address. In some cases, you may need a repo agency to find the car or just hire a private investigator.
To repossess the car, you need the complete paperwork showing that you’re entitled to repossess that car.
It should include the original contract and payment proof (indicating payments received and months missed).
3. Repo the car
If you don’t have the spare key, the key code could be used. Usually, key codes are found on the original vehicle invoice. You should find a small, white bar coded tag with most modern cars with the code printed on it—NHTSA.
Alternatively, you can pick the lock of the car. Just insert a metal rod like Slim Jack through the window and pull up the door lock. Here’s a guide to breaking into your car. Another handy tool to use is a wire coat hanger bent with a hook at one end.
Finally, tow the car or have a tow company do the job. If you want to drive the car away, you need to learn how to start it without a key, and this will involve “hot wiring”. Perhaps, the best option is to have it towed by a licensed agency.
When you have possession of the car, move it to a secure location until the family member resolves the payment problem. Do note that you are responsible for the condition of the car in your possession. Thus, the family member can make a legal claim against you for any value loss.
4. Don’t go against the law
You want to ensure peace throughout the process. Do note that repossession law is different in some states. For instance, while some states mandate notifying the debtor, others allow you to repo at will since you’re the lienholder.
Secondly, while you repo the car, you must be careful not to “breach the peace”. A breach of peace means you can’t break into your family member’s property or their locked garage to repossess the car.
You mustn’t cause a fight or inflict harm in the process, usually if the relative sees and tries to stop the repossession. Also, damage to their property and the car during repo is illegal in most states, irrespective of your lien holder status.
5. Repo the car only
You don’t have the right to repo additional property inside the car, including their computer, camera equipment, business paperwork, and briefcase, to mention a few. State laws require you to notify the family member of the procedure to recover their property not part of the loan deal.
6. Recover your money
First of all, you may be required to give the family member the opportunity to redeem the car by paying off the amount they owe to buy it back. Refer to your state laws to see if this is applicable.
If this does not apply or the debtor can’t buy it back, you can advertise the car for sale. In most states, you must notify your family member of the location and date of sale for the car so they can buy it back if possible.
The reason for listing the car commercially for sale is to recover the debt. The car must be advertised fairly and conducted at a place and time that will bring a fair price. Informing a few friends about an auction to sell the car is not commercially reasonable. However, you decide how much is reasonable and a fair price for the car.
7. Return any excess amount
Make sure to keep correct records of the repossession and sale. Usually, you’re entitled to recover:
- the full unpaid loan amount;
- any costs of the repossession;
- advertisement of a sale;
- costs of auction; etc.
Keep a record of the costs so you can present them to the family member in case they question your figures.
Read also: if your relative won’t turn in the car, you can report it stolen!
Depending on your state, if the sale amount does not cover the debt, the family member is responsible for the balance. However, you must return any excess value (if any) after the sale to the relative. Of course, you can only collect what you are owed.
While the steps above will repo a car from a family member, watch out for a bankruptcy claim. If you’ve been notified of a bankruptcy claim, do not repossess the car or try to sell it (if you’ve repo’ed it already. Instead, keep the car secure until a representative of the bankruptcy court contacts you with further instructions.
Also, if you’ve already advertised the car for sale but have no bids yet, cancel the advertisement and find out from the bankruptcy trustee to know if you should proceed.
The point is that you could be violating federal law if you proceed with the sale despite a bankruptcy notification—apparently, this can be a problem for you.