Responsibilities Of a Lender Repossessing a Vehicle In Phoenix, Arizona


Depending on your priorities and monthly expenses, one of the first bills that you probably make sure gets paid is your car loan. When someone falls behind on their car loan, it won’t take long before the bank that issued the loan sends someone to repossess the vehicle. This can create a domino effect- without a vehicle, it can make it more difficult for that person to get to work on time and cause them to lose hours or even their job altogether. Or, they might need to spend money from an already tight budget on public transportation, rideshares, etc. It can be difficult to fight back against a repossession based on non-payment. However, there are still rules and limitations that lenders must abide by when proceeding with a vehicle repossession. They are put in place to protect consumers from financial institutions with massive resources. If you are facing a vehicle repossession in Phoenix, Arizona, or looking to address a remaining deficiency balance after a repossession, bankruptcy might be able to help. Our bankruptcy firm offers free initial phone consultations and post-filing payment plan options starting as low as $0 down- call 480-470-1504 to schedule your free consultation today.

A close-up of a gavel on a desk with the scales of justice in the background, symbolizing legal proceedings, possibly related to a lender repossessing a vehicle

Breaching The Peace

Auto loan lenders have great leeway in collecting unpaid debts. In most cases, they can repossess a vehicle without prior notice to the borrower. However, the lender also must avoid breaching the peace in pursuit of a vehicle repossession. Examples of breaching the peace in the context of a vehicle repossession include:

  • Pulling you out of your vehicle to clear the driver’s seat and take back the vehicle
  • Breaking open your garage door to gain access to your vehicle
  • Entering your home without your permission to gain access to your garage and vehicle
  • Threatening to attack you if you don’t turn over your vehicle for repossession
  • Destroying your other property until you surrender access to your vehicle

Avoiding breaching the peace is an ethical obligation of a lender proceeding with a repossession of any type of asset, including a vehicle. If the repo man is behaving in a way that could be considered breaching the peace while repossessing your vehicle, you should be sure to take photos and videos if possible, and also notify law enforcement. When it comes to vehicle repossession, most of the actions that are breaching the peace are against the law. Allegations of breaching the peace can be used as a defense in a deficiency lawsuit or to pursue monetary damages. If you have been the victim of breaching the peace during a vehicle repossession and would like to know how this impacts your pursuit of debt relief, call 480-470-1504 for your free consultation. 

Commercially Reasonable Sale Time

After a vehicle has been repossessed, the lender will sell it at auction. Proceeds from the sale will go to pay off the loan balance, which may be inflated by interest and legal fees. The lender must conduct the sale in a time that is considered “commercially reasonable.” The determination of whether conduct was commercially reasonable is defined by U.C.C. § 9-627. A repossession auction is considered commercially reasonable if it is:

  • In the usual manner on any recognized market;
  • At the price current in any recognized market at the time of disposition; or
  • Otherwise in conformity with reasonable commercial practices among dealers in the type of property that was subject of the disposition. 

If the sale of a vehicle takes too long, the vehicle could lose value and even develop mechanical issues. However, it is more likely for a repossession sale to be considered commercially unreasonable because it occurred too quickly. The borrower should have an opportunity to redeem or reinstate the loan. They could also have personal possessions in their vehicle that need to be retrieved before the vehicle is sold. 

Notice Of Sale

Arizona requires creditors proceeding with a vehicle repossession to provide the borrower with a written notice of sale. The sale should include several items of information. If the vehicle will be sold at a public auction, the borrower should be informed of the date and time of the auction. The borrower also needs to be notified of the time after which a private sale of their repossessed vehicle will be made. The notification should include information about your right to know how the sale proceeds will be applied. The notification should indicate whether you will be liable for a repossession deficiency balance. It should also provide you with contact information for loan redemption and other information. Arizona law doesn’t provide a certain deadline within which the lender must provide notice of the sale and only requires that it be done in a “reasonable” time frame.  

Surplus & Deficiency

It is unlikely that a repossessed vehicle will sell at auction for exactly the balance of the loan plus the cost of repossession fees, interest, etc. When the car sells for more than this amount, the balance is known as a surplus. If it sells for less than this amount, it is known as a deficiency. You are entitled to any surplus balance after the sale of your repossessed vehicle. However, because of all the fees that a lender is entitled to add to a repossessed vehicle’s loan balance, this is uncommon. More often than not, someone whose vehicle is repossessed will be left with a deficient balance. The lender can sue you to repay that balance despite the vehicle already being taken away from you. If you are being sued for the deficiency balance from a vehicle repossession in Phoenix, bankruptcy might be a suitable option for you- call 480-470-1504 to learn more. 

Compliance With The Automatic Stay

Filing for bankruptcy can stop a vehicle repossession because it protects the borrower through the automatic stay. When the automatic stay is in effect, creditors can’t proceed with repossessions, foreclosures, lawsuits, and more. That means that if you file for bankruptcy before your auto lender repossesses your vehicle, they will be prevented from doing so at least until your bankruptcy case is over. This is usually within 3-6 months with a Chapter 7 bankruptcy, and 3 or 5 years with a Chapter 13 bankruptcy. However, a creditor can ask the court for permission to proceed with a collection effort, such as a vehicle repossession, despite the debtor’s protections from the automatic stay. This is done through a petition for relief from the automatic stay. If granted, the borrower can repossess the vehicle, but the debtor’s other creditors will still be prohibited from engaging in collection efforts. 

Mitigate The Effects Of Repossession With Bankruptcy

If you’re facing a vehicle repossession or your vehicle has already been repossessed, you could be struggling with debt that is impossible to surmount on your own. Bankruptcy provides relief and protection to honest people with debts that are creating issues for them. Don’t let your auto lender take any more money from you than they already have. At My AZ Lawyers, we can walk you through your options and provide quality representation if you believe bankruptcy is the right choice for you. To get started today with your free consultation, contact us through our online form or call 480-470-1504


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