Understandably, the idea of losing your car causes a lot of stress. There’s a reason you have your car — unless you live in Chicago and use public transit, you need your own transportation to get to work, the store, and pretty much anywhere else. Unfortunately, debt and financial trouble creep up on countless Illinoisans every year, and they often lose their vehicles as a result.
That’s thanks to Illinois auto repossession laws that allow certain creditors to take your car if you fall behind on your payments. Whether you think you’re headed for repossession or have already experienced it, arming yourself with knowledge is the way to give yourself the best possible chance of keeping your vehicle. Read on to learn more, or contact the bankruptcy professionals at A Bankruptcy Law Firm, LLC to learn how we can help.
How Auto Repossession Works in Illinois
On the surface, auto repossession in Illinois sounds like a fairly simple, although stressful, transaction: You miss payments, and the “repo man” comes to your home and takes your car as punishment. That’s certainly how it looks in TV and movies, but at least in Illinois, there’s a lot more to auto repossession. Here’s what you need to know.
Your Car Is the Collateral
In most cases, when you buy a car, there’s a statement somewhere in the documents you sign that says your car will be considered the collateral for the auto loan. To put it simply, this means that your new car is what is guaranteeing that you will repay the loan. You will either make the payments or the creditor will take the car away and sell it to recover their losses on your loan.
An important thing to remember is that vehicle repossession is only legal in Illinois when the creditor has a valid security interest in the vehicle. This means you agreed to have the car stand in as collateral on a loan of some kind — most often the auto loan. Creditors who do not have a security interest in your vehicle, such as credit card companies, cannot come to your home and take your vehicle, although they can sometimes obtain assets like vehicles through other means if you’re behind on payments.
All It Takes Is One Missed Payment
Your auto loan lender can come and take your car if you miss even one payment. You read that right: one payment. Technically, missing a single payment can mean you have defaulted on the loan terms, and that can be grounds for auto repossession in Illinois.
Of course, it often takes more than one payment for a creditor to send a repossession agent out to take your car. More often than not, it’s in the creditor’s best financial interests if you make all of the payments. Still, it’s important to remember that one missed payment can be all it takes.
A Repossession Agent Takes Your Vehicle
Once the creditor has decided to repossess your vehicle, they can send a repo agent to your home, place of work, or really anywhere your vehicle is to take it. You may or may not receive a warning that repossession is coming. As long as they follow Illinois auto repossession laws, they can come and take your vehicle without warning you.
The Creditor Applies to Get the Car’s Title
In most cases, the creditor will want to sell your vehicle after repossessing it. They don’t have to sell it, but this is typically the most efficient way to recover their money. So, most creditors do sell vehicles they have repossessed. However, they can’t just take your car and sell it the same day.
Before they can do that, creditors have to send you a notice that informs you of their intention to apply with the Illinois Secretary of State to receive a repossession title that will allow them to sell the vehicle.
They also have to send what’s called an “Affidavit of Defense” form. This form allows you to list any reasons why the repossession was improper or the creditor is incorrect about what you owe them. You have 21 days to send this form back to the creditor. If you meet that deadline, the creditor must take the matter to an Illinois court to determine whether they have a legal right to your vehicle’s title and the ability to sell the car.
It’s important to keep in mind that the creditor may file a lawsuit against you to recover the right to sell your car. If you believe you have a valid defense for keeping your car, this may be worthwhile. But if the court decides that the creditor does have the right to sell your repossessed vehicle, you may end up owing more money in court fees. This is why it’s so important to talk to a lawyer before you take action after a vehicle repossession.
Your Vehicle Is Sold
Should the creditor gain the right to sell your vehicle, they have to give you notice that the sale is going to happen. That’s true whether the sale is private or public, such as at an auction.
When they do sell the repossessed vehicle, they have to sell it in a commercially reasonable way. In other words, they can’t just give it away for a couple of bucks. But sometimes, the creditor will be unable to sell the vehicle for an amount that covers how much you owe on it. In such a case, you have what’s referred to as a “deficiency” on your hands.
Creditors like to sue debtors for deficiencies. This is how they recover the difference after selling your car for less than what you owed.
Illegal vs. Legal Car Repossession
We have covered the basics of the Illinois auto repossession process, but when you’re looking for ways to prevent a repossession or get your vehicle back after one, one of the first questions you need to answer is this: Was the repossession legal?
An auto repossession can be illegal in several ways. Here are some examples:
- Breach of peace. Repo agents are not allowed to breach the peace when they take vehicles. That means they can’t take your car using force or threats, and even if they take it while you’re firmly objecting to it, that may be construed as breaching the peace.
- Improper repossession. No matter what they may tell you, repo agents cannot break into your garage to take your vehicle. In fact, they can’t destroy any of your personal property in order to repossess the vehicle.
- The creditor has accepted late payments in the past. If your lender has a history of accepting late payments from you, your attorney may be able to make a valid argument against the repossession.
- The creditor agreed to accept late payments. If the creditor agreed to accept late payments, despite what the loan terms may say, their repossession of your vehicle may not hold up.
- The vehicle wasn’t collateral. If the creditor took your vehicle in order to collect on some other debt or your loan simply did not list the vehicle as collateral, the repossession is illegal under Illinois law.
- You weren’t in default. If you still had time to make the payments or were all caught up, the repossession of your vehicle will be considered wrongful.
If you believe the repossession of your vehicle was illegal in some way, it’s important to reach out to a qualified lawyer who can discuss next steps with you.
Recovering Your Personal Items from a Repossessed Car
The creditor may have a valid security interest in your car, but they most likely do not have a security interest in the things that were inside your car at the time of repossession. But because repossession can happen with little or no warning, you might have lost some personal property that was in your vehicle.
The good news is that you can get it back. Under Illinois law, repo agents have to make an inventory of all of the personal property that was inside your car when they took it. They can’t get rid of these items until 45 days after the repossession, and they have to give you a written notice that includes their intent to dispose of your property and where you can go to pick up your personal effects.
In most cases, repo companies are not allowed to charge you a fee to recover your belongings. Sometimes, however, they still try to do just that. This is a situation in which having a lawyer on your side can be extremely helpful.
If your car has not yet been repossessed but you think it will be soon, it’s often a good idea to take your belongings out of your car. Even though you have a right to recover your personal property after repossession, doing so can be an enormous hassle during an already stressful time.
Getting Your Car Back After Repossession
The game isn’t over after the repo agent drives away in a truck with your car in tow. Thankfully, Illinois vehicle repossession laws give you a few options for getting your vehicle back.
The 30 Percent Rule
If you have already paid 30 percent of what you owe for your vehicle, Illinois law says you have a chance to get your vehicle back. This is called the “30 Percent Rule.”
You only get this chance one time per vehicle. If you have paid 30 percent of what you owe at the time the car is repossessed, the lender has to send you a notice of your ability to redeem the vehicle within three days of the repossession. In such a case, you have to pay the following to get your car back within 21 days:
- Your overdue car payments
- Late payment fees
- The cost of the repossession
Once you’ve paid for those items, your car will be yours again.
Paying the Full Amount Owed
If you have already used the 30 Percent Rule or haven’t paid 30 percent of what you owe at the time of repossession, you still have a chance to get your car back. However, this method will likely cost a lot more.
You have a legal right to get any repossessed property back if you pay the full amount you owe, as well as charges for vehicle storage and repossession, before the creditor disposes of the property. Obviously, most people do not have enough cash on hand to do this, but if you can come up with the money, it’s one way to get your car back after repossession in Illinois.
How to Prevent Auto Repossession in Illinois
Like most things, being proactive about auto repossession is often better than being reactive. If you can prevent the repossession from happening in the first place, you will save yourself a lot of headaches. The best way to prevent auto repossession in Illinois is to keep up with your payments, but when that isn’t possible, you may have some other options.
Filing Chapter 7 Bankruptcy in Illinois to Keep Your Car
When you file bankruptcy in Illinois, a judge issues an automatic stay. This stops creditors from taking any further debt collection actions until your bankruptcy is settled. That means they can’t repossess your car.
In Chapter 7 bankruptcy, you liquidate some of your assets to repay part of what you owe. The rest of your debts are then discharged, meaning you don’t owe them anymore. In some cases, this might mean that you will lose your car. However, bankruptcy exemptions and careful planning with the help of a Chapter 7 bankruptcy attorney can help you file Chapter 7 bankruptcy and keep your vehicle.
Keep in mind that bankruptcy is not always the right choice. In most cases, you shouldn’t file bankruptcy if your auto loan is your only debt. However, it’s often a good choice for people who are in financial trouble. Speak to an attorney or financial professional before you make your decision.
Filing Chapter 13 Bankruptcy to Keep Your Car
Chapter 13 bankruptcy allows you to keep your assets, including your car, if you set up a three- to five-year repayment plan that satisfies a portion of your debts. You still get the automatic stay in Chapter 13, so this option can be a good one if you are worried that your car is going to be repossessed but you have a relatively stable income that could support a long-term debt repayment plan.
Negotiate with the Creditor
In some cases, you may be able to reach out to your lender before repossession occurs to negotiate a deal to keep your car. Keep in mind that Illinois auto repossession laws don’t really cover this kind of negotiation, and creditors may not always be willing to work with you. Still, this option can serve as an alternative to bankruptcy that allows you to keep your car from being repossessed.
Dealing with Auto Repossession in IL? We Can Help
There’s no getting around it — auto repossession is stressful. When you feel it coming, you might be filled with anxiety. When it has already happened, you’re left grasping for any possible way to get your car back.
It doesn’t have to be this stressful. With a trusted Illinois bankruptcy lawyer on your side, you get an experienced ally who can help you understand your options for keeping your car, getting your vehicle back, getting your financial situation in order, and possibly filing bankruptcy.
There’s no reason not to call. We’re waiting and ready to help you understand Illinois auto repossession laws and the best way forward. Schedule a free consultation with A Bankruptcy Law Firm, LLC, today by calling (800) 7-BENSON or contacting us online.