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I am J. Thomas Black, Attorney At Law. I'm Board Certified in Consumer Bankruptcy Law by the Texas Board of Legal Specialization. This is my free explanation about Repossession in Texas. This information is designed to give you some general information about repossession, and your rights under state and federal law. This information is not legal advice or guidance for your particular situation. Each case is different, and to get legal advice that you can rely upon in your particular situation, you should meet with me or another attorney experienced in these matters, and tell him or her all the details, and be sure to be truthful. I'm going to give you a lot of information on this message, so before I begin I'll tell you what I'm going to tell you. First, I'll tell you about dealing with lawyers, and necessity to be truthful with me. I'll tell you what a repossession is, and how it's done. Third, I'll tell you what can't be done by the repo man and what you can do if he breaks the rules. Next I'll tell what happens after the repossession, about how you can get the car back without filing Bankruptcy, and what happens if you just let it go. Finally, I'll tell you about bankruptcy, both Chapter 7 and Chapter 13, what it can do for you by letting you keep the car and pay it or it's value out over time, at a level you can afford, and then I'll tell you about the atty fees and how that is normally handled. Many people meet with attorneys and feel that if they explain only their side of a dispute, leaving out the unfavorable information, then the matter will somehow work out better. The attorney will just explain the client's side of it, and that'll be it. So please, always be totally honest and upfront with your lawyer. Whatever you tell him or her is subject to the attorney-client privilege, that is, it's secret and confidential and will not be revealed to anyone without your permission. What is a Repossession? Now, you're probably calling because you're about to have a vehicle or other property repossessed. In Texas, state law provides that a creditor with a lien upon personal property may repossess the collateral if the debtor (that's you) is in default, that is, if you haven't made payments, if you've failed to maintain insurance on the collateral, or committed some other breach of the underlying contract or security agreement. The creditor need not give you any notice of the repossession before they "repo" the collateral. If fact, the creditor is unlikely to give you notice of exactly when or where they intend to pick up the collateral, because they're concerned that you'll hide it or otherwise keep it from them. One of the most embarrassing moments that I have heard of is the client that I had many years ago that came out of the grocery store, loaded down with babies and groceries, only to find the repo man had taken her car while she was shopping. She had waited a little too long to take care of the matter. Please, if you need help, see me or another experienced bankruptcy lawyer promptly to avoid the repossession of your vehicle. Now, it's not necessary in Texas for a creditor to get a court order before repossessing collateral. That is, they can use self help, by picking up the vehicle themselves or having a repo company do it for them. This is the most common way creditors repossess vehicles in Texas. They can get a court order first if they want to, called a writ of sequestration, which basically orders a sheriff or other peace officer to get the vehicle. To get such a writ, they first file a lawsuit against you, asking for all the money you owe them, attorney's fees and court costs, and any expense of obtaining and selling their property. If the vehicle is picked up under a writ, and sold, you're then given credit against the debt for whatever the vehicle is sold for. Always hire a lawyer if you're served with a lawsuit or writ of sequestration.
Breach of Peace.
Now, even though a creditor may repossess without notice, and without a court order, he or she is not allowed to repossess if the repossession involves a "breach of the peace." That is, a creditor cannot legally break into your garage to get your vehicle, run you off the road, take it by force, take it over your objection, or the like. Court decisions have held that it is OK for a creditor to repossess a vehicle from a driveway or from a public street, so long as it is done without a breach of the peace. What exactly constitutes a "breach of the peace" depends on the facts of each case.
If a creditor does breach the peace while repossessing a vehicle, or repossesses one without the legal right to do so, then the creditor may be civilly liable to you for money damages for wrongful repossession, conversion, assault and battery, or other "torts" for which you may be able to sue the creditor. Even though a creditor may not breach the peace in repossessing the vehicle, please don't just hide or refuse to surrender collateral to a lienholder indefinitely. You have a duty under the civil law, the Texas Business and Commerce Code, Sec 9.503 to make collateral available to a lienholder when demanded.
There is also a criminal statute, Hindering Secured Creditors, Sec 32.33 of the Texas Penal Code, which makes it a crime to conceal, remove, or harm, etc. property on which there's a lien with the intent to hinder enforcement of the lien. I don't get reports that this law is used that much, but it's certainly on the books, so if you're in default and a lienholder makes demand on you for return of the collateral, it's another reason to see a lawyer right away.
What happens after a Repossession? What's the usual result of a repossession? Well, the repo company takes the repossessed vehicle to a storage lot or auction house, where it's stored for a period of time. Under state law, the repossessed vehicle must be sold in a "commercially reasonable" manner. You must be given reasonable notice of the date, time and place of the sale, which has been interpreted to mean no fewer than 10 days after the date you were given notice of the sale, at the last known address the lienholder had for you.
Now, they only have to mail the letter, not see that you get it. So, for this purpose you would always want to pick up your mail, it's usually sent certified mail, so that you know what's going on. The notice is good if mailed, whether or not you pick it up from the post office. The lienholder is also supposed to give notice to anyone else who signed on the contract, such as a co-signer.
Now, this notice of the sale is intended to give you an opportunity to "redeem" the vehicle, that is raise the money to get it back. Almost without exception, a bank or finance company, whoever has repo'd your vehicle, unless you file a Ch 13 which I will go into in a few minutes, will insist upon you paying the full amount of the debt, plus all expenses of repossessing and storing the car, to get it back. Depending upon your circumstances, you may want to try to borrow the money from a friend or relative to redeem it, have the friend or relative co-sign a new loan for the vehicle for you to get the car back, or find another way to come up with the money. The repossession can be reported on your credit report for 7 years. If you redeem the vehicle, that fact also shows on your credit, and I would think make it look somewhat better. If you can't (or won't) redeem the vehicle, and you do nothing else, such as file bankruptcy, then the vehicle will be sold, typically at auction, and the proceeds applied to the balance due on the loan, and you still owe the difference between what you owed on the loan, and what the vehicle was auctioned for, and this often is not anywhere near what you could sell it for. Also, the lender tacks on all the costs of repossession, storage and sale fees, etc., etc. Lawsuit If you don't pay, the lender can then file a civil lawsuit against you for this unpaid balance, and typically the debt will increase by another one-third to one-half for the lender's atty fees and court costs. After that, the judgment bears interest at the contract rate until paid. The judgment is good for ten years, and can be renewed. The judgment remains on your credit report for as long as it is valid. Your Options Now, to stop a repossession, obviously I would suggest that the debt be brought current. You may not know that sometimes lenders will agree to defer payments, put them at the end of the contract, let you pay a payment and a half, etc., if you'll be able to make payments on time from now on. Perhaps other arrangements can be made, depending on your case. But be careful, sometimes lenders will lull you into thinking everything is OK, and then pop the car. Don't be stupid. Bankruptcy If there's no other choice, consider filing a case under the U.S. Bankruptcy Code. Under either Chapter 7 or Chapter 13 of the Code, the most common chapters used by consumer debtors, an "automatic stay" or federal court order goes into effect immediately upon filing the case with the court, which stops repossessions and all other debt collection actions against you in their tracks, by all your creditors, including the IRS. Chapter 13 Under Chapter 13, a plan can be proposed, which basically combines or consolidates all of your debts, and allows you to pay what you can afford to pay over a 3 to 5 year period, with any unpaid balance at the end cancelled or discharged. And you still get the title to the vehicle. The plan re-finances the car and allows you to pay the lesser of what the car is worth, or what's owed, whichever is less, over a period of time, usually the 3 to 5 year length of the plan.
Your responsibilities during the plan are to make your Chapter 13 plan payment and keep the vehicle insured with "full coverage" insurance. And your creditors are required to leave you alone- they can no longer call you, send you bills, or threaten to take your property so long as you comply with your plan.
Chapter 7 Most people faced with repossession want to keep their car, so Chapter 13 appeals to them. But if you want to surrender the car, but don't want the lienholder coming after you with a lawsuit, you may want to consider filing a Chapter 7 Bankruiptcy. In Chapter 7, all of your debts, with very few exceptions, are cancelled. If you are in possession of a vehicle with a lien on it, you must pay for it according to the promissory note or contract that you signed when you bought it, or surrender it to the lienholder.
It may be possible to make other arrangements with the lienholder in a Chapter 7 to where you keep the vehicle, depending on your case. You do have the right to "Redeem" the vehicle in Chapter 7 by paying the lender what the vehicle's worth, but they can insist upon this money in full and in cash, so you may have to borrow the money to do this Chapter 7 Redemption. Please note that this Chapter 7 Redemption is a different right than you have under state law, to redeem vehicles after a repossession.
Conclusion Well, folks, in case you haven't noticed it so far, the laws in this area are complex. Laws have to be complicated, because we live in a free country, and we all have so many rights. If you have a repossession or other serious debt problem, you should have an experienced lawyer representing you. Don't feel embarrassed or ashamed to get help when you need it. Lawyers even hire lawyers to handle personal legal problems. Attorney Fees Don't be worried about the attorney fees necessary to do your case. To start a Chapter 13, we will need a small retainer up front, with most of my fee coming out of the payments that you make to your plan. Depending on your circumstances, we can even give limited terms on paying the fee if you need a Chapter 7 case. To start your case, to make an appt to see me, or to get more information, call my main telephone number, 713-772-8037 during business hours, and press 0 to make an appointment. I also have appointments available evenings and Saturdays. My office is at 2600 So. Gessner, Suite 110, Houston TX 77063. That is near the intersection of Westheimer and So. Gessner, in the Capital One Bank Building.
I am Board Certified in Consumer Bankruptcy Law by the Texas Board of Legal Specialization.
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