Blog

Call Us312-704-0771

Chicago debt collection attorneys
Subscribe to this list via RSS Blog posts tagged in auto lender

Illinois Suspends Vehicle Repossession by Auto LendersThe COVID-19 pandemic has affected all areas of commercial lending, including automotive loans. With millions of Americans out of work, consumers may have more difficulty paying off the loan on their vehicle. Auto lenders have ways to handle clients who have fallen behind on loan payments, whether it is modifying the terms of the loan to give the client leeway or pursuing debt collection. However, repossession of the vehicle may not be an option right now, depending on where the client lives. You must examine recent laws and executive orders to ensure that you are not committing a violation when repossessing a vehicle.

Temporary Freeze on Repossession

Since the start of the crisis, states have differed on whether they will continue to allow vehicle repossession when a debtor is unable to make loan payments. Some states have strictly prohibited it, while others are merely recommending a pause on repossessions. In Illinois, Gov. J.B. Pritzker issued an executive order that suspended vehicle repossessions for as long as the state’s disaster proclamation is in effect. As of May 29, the disaster proclamation has been extended until June 27. The executive order cited several reasons for suspending vehicle repossessions:

  • Many Illinois residents are facing financial hardship because of the lockdown imposed by the state.
  • Having a vehicle is essential to public safety in order to obtain supplies and travel in the event of a medical emergency.
  • Essential workers rely on their vehicles in order to get to their workplaces.
  • Individual vehicles allow residents to travel while practicing social distancing.

Your Options as a Lender

Illinois’ executive order states that the pause on vehicle repossession does not affect your client’s obligation to continue paying the loan. Once the order is lifted, you may be able to move forward with repossession efforts if that is the stage you are at in the debt collection process. Until then, you can communicate with your clients to make sure they understand the consequences of missing loan payments and decide whether to allow deferments on payments in some cases.

...

Using Replevin, Detinue to Repossess VehiclesAs a secured creditor, there may come a point in the debt collection process when you decide that you are best served by repossessing the collateral property. Auto lenders commonly deal with repossessing vehicles when the debtor defaults on their loan and shows no intention of working with the lender to catch up on the missed payments. However, debtors may not cooperate when you try to repossess their vehicle, whether they actively deny your repossession efforts or try to hide the vehicle from you. In these situations, you can force compliance by requesting a replevin or detinue from the court.

What Are Replevin and Detinue?

Replevin and detinue are similar legal actions that can help you recover a property held by a debtor. The main differences are:

  • Replevin allows police to seize property and return it to the creditor and is more generally used when a defendant wrongfully took a property.
  • Detinue orders the defendant to surrender the property to the creditor because they are wrongfully withholding it.

With replevin, you may be able to seize the property after the defendant has been given a five-day notice. With detinue, you often must wait until the end of the case to retrieve the property. With both actions, you must be able to clearly identify the property and prove that you have a superior claim to ownership, which for auto lenders would be proving that the defendant has defaulted on their loan agreement. Along with retrieving the property, you may be able to collect damages from the defendant if there was a cost that was related to them withholding the property. If the property cannot be found, the court will order the defendant to pay you the monetary value of the property.

...

What Voluntary Repossession Means for Auto LendersRepossession is often the last resort for auto lenders when dealing with debtors who are behind on their loan payments. You are more likely to retrieve full value on the loan if the debtor continues to make payments than if you repossess the vehicle and resell it. There is also the hassle of notifying the debtor of your intention to repossess and hiring someone to tow the vehicle for you. However, the process can be simpler if the debtor voluntarily turns the vehicle over for repossession. In most cases, the debtor will be the one to suggest voluntary repossession.

How It Works

The result of voluntary repossession is the same as involuntary repossession. You will regain possession of the vehicle and sell it to recuperate the money owed on the loan. The debtor will be liable for any deficiency between what you receive in the sale and what remains from the loan. The difference is that the debtor agrees to surrender the vehicle and will deliver it to you at a time and place of your choosing. The debtor’s compliance means that you will not be fighting over whether you have the right to repossess the vehicle or using a towing service to retrieve the vehicle.

Why Voluntary Repossession?

The debtor still has much to lose by surrendering the vehicle to you. They are losing possession of the vehicle and defaulting on the loan, which will hurt their credit. However, they may prefer voluntary repossession if they believe repossession will be unavoidable:

...

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:

...

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.

...
Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
Back to Top