There are many misconceptions regarding repossession law in Texas. A creditor may repossess secured collateral (vehicles, furniture, appliances, etc) anytime you are late or otherwise in default on your loan. Many people think you must be a certain number of months behind in your payments before a creditor may repossess. This is not true. You need only be late under the terms of your loan or in default for things such as not carrying proper insurance on your vehicle.
NO NOTIFICATION IN REPOSESSION
A creditor does not have to give you advance notice before repossessing. A creditor may repossess collateral without a Court order, but may not “breach the peace” while repossessing. What is a “breach of the peace” may be fact specific, but generally a “repo man” may not break in to your home, garage or closed gate and may not harm or threaten you.
If you find yourself falling behind on car or personal property payments (such as furniture or appliances), the first thing to do may be to contact your creditor if it is just a temporary issue. Some creditors may let you put a payment or two at the end of the note or give you a few months to catch up, but they are not obligated to work with you. It is important that you get any agreement in writing because creditors may still repossess after accepting a partial payment. If you are more than a payment or two delinquent or the Creditor is already seeking the collateral, it is advisable to contact an attorney as soon as possible to know your rights and obligations.
RESPONSIBILITY FOR BALANCE DEFECIENCY
If your vehicle is repossessed, the Creditor may sell it at auction and you may still be responsible for any deficiency balance (the difference of what you owed and what was received for the car at auction) as well as additional repossession, storage and attorney fees. The Creditor may sue you for a judgment on the deficiency balance. You may still be liable for a deficiency balance even if you voluntarily surrender the collateral or allow a “voluntary repossession.” You may also be liable on any vehicle loan you co-signed for another person if they fall behind on payments or have the vehicle repossessed.
Once a vehicle is repossessed, the Creditor must give you at least ten days’ notice before it is auctioned. However, outside of bankruptcy, most creditors will not release the vehicle unless you pay the entire debt owed (not just what you are behind) plus repossession and storage fees. Filing a Chapter 13 bankruptcy may stop repossession or even allow you to get the vehicle back if it has already been repossessed, but not yet sold. A Chapter 13 may allow you to reorganize your debt and pay it back over time, often at a lower interest rate and sometimes you may only have to pay the fair market value of the vehicle. Timing is critical, so it is important to contact an attorney as soon as possible. Even if you do not want the vehicle returned or if it has already been auctioned, it is advisable to contact a bankruptcy attorney as filing a Chapter 7 or Chapter 13 may stop or satisfy a deficiency judgment.