Consumer Law

What Is Repossession? 

When you buy something on credit, or get a loan, the person or business you owe the money to is called the "creditor." Often, you will sign an agreement giving the creditor the right to take back the goods you purchased if you miss payments. (Or if you have used your current household goods or automobile to secure a loan, the creditor may take your property if you miss payments on the new item.) The property which can be taken is called "collateral" or "secured property." When your creditor takes the goods back, it is called "repossession."

When Can A Creditor “Repossess” My Property? 

It is illegal for creditors to repossess unless the contract provides a right to repossess. You can sue creditors for interfering with your property if they illegally repossess. Usually a creditor repossesses your property because you are "in default." A default occurs if you have missed one or more payments or have violated the contract in some other way. ( Sometimes a creditor may let you pay late or make a partial payment. If so, they generally cannot repossess just because you pay late or make a partial payment, unless they first notify you that late or partial payments will not be allowed in the future.)

If you have defaulted on or violated your contract, your creditor can sue you or use self-help repossession to recover the "collateral" or "secured property." If the creditor sues you and gets a court order, only the Sheriff can seize your property. However, creditors can repossess without a court if they do not "breach the peace." If the creditor uses force to repossess, this is a breach of peace and is illegal. For example, a creditor cannot break into your home or a locked garage to repossess. But they can repossess a car from your driveway or in front of your house, even if the car is locked. Note: Some creditors will follow you so they can repossess your car from a public parking lot (for example, while you are in a supermarket), so there won't be a breach of the peace.

Could I Get My Property Back (“Redeem It”)? 

You can "redeem" the property (get it back) by paying the creditor the entire unpaid balance on the debt, plus reasonable expenses of the repossession. Usually you cannot redeem just by paying the past-due amount (ORS 79.5060). You must redeem before the creditor sells or disposes of the property or signs an agreement to do so.

Will My Property Be Sold After It Is Repossessed?

Even if creditors repossess in a legal way, there are other rules which they must follow. The creditor may sell your goods at a private sale or public auction, or may keep the property in satisfaction of the debt.(ORS 79.5040). You must be sent a written notice telling you whether the goods will be kept or sold. If they will be sold, you must be told when the sale will happen; and if the sale is a public auction, you must be told where it will be. For most contracts, if you have already paid 60% or more of the cash price or loan for the property that was repossessed, then the sale or other disposition of the property must take place within 180 days of the repossession (ORS 79.5050). (If you have not paid 60%, the creditor can choose to sell the property or keep it in satisfaction of the debt.) The goods must be resold in a "commercially reasonable manner" which means the place, time, and money received must all be "reasonable." If the creditor does not follow these rules, you may be entitled to money damages for unlawful repossession.

Note: A sale is not unreasonable just because the creditor could have obtained more money by doing the sale differently. It is common for these sales to produce less money than you expect.

Will I Still Owe Any Money After The Repossession Or Sale? 

Money from the sale will be applied first to the expenses of repossession and sale and then to the balance owed on the debt. If there is money left over, you have a legal right to receive it. Usually, the money from the sale is not enough to cover the entire balance owed on the debt. Any debt left after the sale money is used up is called a "deficiency." Generally, the creditor can sue you to collect the deficiency amount. The creditor has 6 years from the date of repossession to sue you for the deficiency.

What If My Car Was Repossessed With Other Property In It?  

Many times when cars or trucks are repossessed, other property such as money, tools, or personal items are inside. Usually, a creditor has no right to any property inside the vehicle and not attached to it. If it is not promptly returned to you, you can sue the creditor for the value of the property, or for its return plus damages. However, anything which is attached to the vehicle is considered part of it. The creditor does not have to return it, and you cannot sue for its value. Examples would include an installed tape deck, new wheels, or new automotive parts. In legal terms, attached property such as this is called an "accession." (ORS 79.3140). Whether something is an accession is a close and unsettled legal question. See, for example, an Oregon Supreme Court case, Bancorp Leasing v. Stadeli Pump, 303 OR 545, 551-56 (1987). You should see a lawyer for advice.

Should I Allow My Property To Be Repossessed?  

It may be difficult to decide whether to allow a creditor to repossess your property. If you refuse to voluntarily surrender the goods or to allow your goods to be repossessed, your creditor may sue you for all the money you owe on your contract. Most contracts allow the creditor to recover attorney fees if they have to sue you. In other words, you may still lose the property and end up owing even more money. It may be better for you to try to sell the goods yourself, as you may get more money than would be obtained at a repossession sale. You will have to have the creditor's permission, but the creditor may agree provided all the sale proceeds go to the creditor.

If you want to keep the property (or get it back), think about whether you are really able to make future payments. If you bought credit disability insurance when you bought the property, and you are now unable to work, you may get help that way. Also, keep in mind you may have some other offsetting claim against the creditor, such as unfair sales tactics or unlawful debt collection practices. A lawyer can help you make a decision. Repo.wpd (7/00)

The statutes referred to can be found in the Eugene Public Library, and in the Lane County Courthouse located at 125 E. 8th Avenue, Eugene, Oregon, 97401. 

Click here to view Oregon Revised Statutes online.

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