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Bill-Collector Confidential
from Chapter 2, How Creditors Collect

 Auto loans


The moment you buy a car on credit, putting it up as collateral, you commit your new treasure to the repo man then and there. Every auto-finance contract says something like: 
 
 "T
ime is of the essence. In the event buyer defaults in any payment, seller shall have the right to declare all amounts due and payable and the right to repossess the property wherever the same may be found with free right of entry, and to sell the same at public or private sale. Buyer shall remain liable for any deficiency."

That “deficiency” means, in addition to losing the car, you still owe the dollar difference between what the auctioneer can get for it (often at a rigged price) and the balance on your loan.
   You probably signed the loan at your auto dealer, but now it is held by some bank or loan company.
   You may surrender your car in advance of the insult of repossesion. That's called
voluntary repossession. It is just as damaging to your credit rating as an involuntary one, no matter what you may have been told. The benefit of voluntary repossession is that there is no repossession fee, which can be $500 or more, to be paid from the proceeds of the sale of the car.
   The repo man's main challenge is finding your car. Once tracked down, it's gone in sixty seconds. The actions of the repo man are those of an auto thief with a license to steal. Occasionally a repo man is mistaken for a prowling thief and shot at. The repo man can search and seize without notice and without a court order and has free right of entry to your private property, short of breaking in. 
   These are extraordinary privileges that strain the Constitution to its limits and get challenged often in the courts and legislatures. You or your lawyer may want to challenge the legality of a seizure. The repo man cannot enter your locked garage. So your best defense may be to secure your car there and walk. If you take the car out for a ride, the repo man may try to grab it after you park it in the street. A determined repo man will follow you to where you are going, using several cars to make it more difficult for you to know you are being followed. (The TV series
Repo Men: Stealing for a Living features live-action repossessions and shows you how the repo man thinks).
   If you borrow from a bank or finance company, independently of a dealer, not using the car as the collateral, as with an auto loan, seizure becomes difficult. Unless put up as collateral, movable possessions (cars, boats, RV's, airplanes) are difficult for a creditor to repossess without obtaining from a court a
writ of replevin, which is almost never granted. If you must get an auto loan, a trusted bank or credit union is better than an auto dealer. If it comes to repo, a bank may conduct the process more ethically, but don’t bet your car on it.
   Delinquent on your auto loan, you may get telephone-dunned within days after missing only one payment. The “buy here, pay here” dealers are even quicker; their collectors get on the phone the day after one payment is missed. If you're in some temporary trouble, and still have the slightest credibility, you may find the lender all too eager to renegotiate the loan. This is to his advantage and your loss. Repossession is a headache for most loan-holders, who will out-source the dirty work. Most would rather write for you an extended loan, even though you may be upside-down on your rapidly depreciating $30,000 “investment.”


Strategies 
 

Communicate, negotiate with the collector, but don't sign another loan. Also don't confide anything about your driving habits that could facilitate a repo. There are finance companies who enforce the contract to the letter, because they are hot for the profits to be had in repossessions, especially by collusive resales.
   When the decision to execute is finally made, you won't be told, and the progress from dunning to repo can be surprisingly quick. Then, your only defense is to elude.
 Most repo's are executed by the lien-holder, that is, the auto dealer, bank, or finance company listed on your title. A less common instance is a seizure by a creditor with a judgement who can get a lien on your car. In this instance, you have a strategy. The economics of a lien-holder repossession are much more creditor-friendly than those of a judgment creditor. In dealer-arranged financing, the lender and the dealer may have a side arrangement that, if the car is repossessed before a certain number of payments are made, the dealer will pay off the loan and take over the debt. This is called recourse, and you, the borrower, will not be told if your loan is a recourse loan or what the recourse terms are. Your only defense then is to lock the car in a garage and walk. Judgment creditors have no such recourse.
   Place your own liens.
You can protect your car from repo by a non-lien-holder, a judgement creditor, by placing your own liens on the car. The official lien-holder then becomes just one among maybe several entities with a lien on your car. 
   When threatened with a repo, load your car up with other liens that you control. One debtor got a loan from his dog and put the dog's name, Howard, on his car’s title as a lien-holder. No sane creditor will repossess a car with more than one lien on it. A debtor who is behind on car payments is often “upside-down;" he owes more than the car is worth, with just one lien. With two liens he is not only upside down, but inside-out. Get a friend, a relative, or your dog, to give you a loan, and secure it with a lien on your car.

Copyright © 2012 by George Trinkaus and Steve Katz. 
All rights reserved.

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