What Are Your Legal Rights When a Car Is Repossessed?

The rights of a borrower when his car is repossessed include the right to know if the car is going to be sold at a public auction, depending on state law, the Federal Trade Commission says. Depending on state law, the creditor must advise the borrower of the plans for the car after repossession. Some states say the borrower must be told when the car was privately sold. Some states also have laws that allow borrowers to reinstate their loans.

Most car loans consider the vehicle as collateral for the loan, Nolo says. If the borrower defaults on the loan, the lender has the legal right to repossess the car. State law differs on the repossession process, but most states have laws that allow the lender to take the car without any warning to the borrower. The law mandates that lenders must not breach the peace when taking the car and the lender or the agent taking the car cannot threaten physical violence when removing the car.

Borrowers with poor credit history tend to be considered flight risks by the bank. Borrowers sometimes have as few as 10 days before the lender comes for the car after the borrower has defaulted in the loan, Edmonds.com warns. The repossession agent may watch the home of the borrower and follow the vehicle when it leaves, subsequently towing the car to the impound yard after the driver parks the car and leaves it.