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Law Protects Servicemembers During Vehicle RepossessionBefore repossessing a vehicle, an auto lender must confirm whether the owner is a U.S. military member on active duty. The Servicemembers Civil Relief Act includes a section protecting active servicemembers who default on their auto loans. The auto lender must obtain a court order to repossess the vehicle. The order may include forms of financial relief not normally given to vehicle owners. Failing to comply with the SCRA can be a criminal offense.

Qualifications

The SCRA applies to people who are away from home while serving as:

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Legal Process for Repossessing a VehicleWhen a debtor fails to pay installments on a car loan, an auto lender may have no choice but to repossess the vehicle. Alternatives would be to refinance the loan or to allow the debtor to repay the money owed in a lump sum at a later date. However, the debtor must have a history of reliably making payments before the lender considers those options. Repossession is the surest way to recover money after the debtor defaults on a loan, though the lender may still not recover the entire loss. When repossessing a vehicle, you must follow a legal process that gives the debtor notice and a chance to repay you.

What Allows Repossession

Your right to repossess the vehicle should be clearly stated in the loan contract. Loan agreements typically include security interests, which are properties that can be used as collateral in case the debtor fails to pay the loan. In a contract for a vehicle payment plan, the vehicle is the security interest. When a debtor does not make a scheduled payment, he or she has violated the contract. The security interest identified in the contract will legally allow you to repossess the vehicle as collateral.

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