The Basics of Repossession in North Carolina
Repossession refers to the actions taken by a creditor or a third party to recover a property or asset that was the subject of a loan or credit agreement after the borrower defaults on their obligations. This type of transaction is often performed by the creditor without having to seek legal action and court order for the recovery of the collateral, and can be initiated and completed as soon as a default occurs and the creditor deems necessary. It is typically conducted in a manner consistent with the terms of the agreement, as outlined in the contract.
In North Carolina, courts generally regard repossession of Personal Property as a self-help remedy to be used by a secured party to recover collateral from the debtor without judicial proceedings. It is governed by statutes in the Uniform Commercial Code. Repo Men refer to the professionals who carry out these repossessions. They serve a valuable service for creditors and companies in North Carolina thru personal contact with debtors where the debtor is not willing to return the collateral voluntarily. Repo Men can avoid the need for lawsuits for collection or dispute, and they provide a rebuttable inference that the plaintiff company/professional made a proper demand for payment or repossession because the documents can be signed and attached to an affidavit in support of a motion for summary judgment or at trial .
The process for repossession in North Carolina is not particularly complicated. The secured party may accomplish the recovery through a repossession agent, i.e., a "repo man," the secured party herself, or it may be accomplished without judicial proceedings. A key point to note about repossession is that it must be done without "breach of the peace." "Breach of the peace" is not defined in the statutes themselves but has been defined by North Carolina courts. Breach of the peace exists when there is some violence, actual or threatened, to persons or property or there is any breach of the peace. Some other examples are taking possession of the collateral by means of a physical threat or physical presence. A creditor may also breach the peace if she makes use of force, fraud, or coercion. If the creditor does not act peacefully, she is liable to the debtor for conversion or trespass to chattels.
The secured party cannot, however, repossess the collateral in North Carolina by entering the debtor’s home. For domestic property (i.e., consumer goods or you home property), the plaintiff must pay the debtor for the moving company to come to your home to pick up the Property. (N.C.G.S. 44A-8(a)(1), -8(a)(2)).
Property Subject to Repossession
The following types of property are subject to repossession in North Carolina:
Vehicles
This includes automobiles, motorcycles, trucks, recreational vehicles, boats and farm equipment. Lenders generally have the right to repossess your vehicle without going to court. They can use a serrurier sav paris to open the locked door of the vehicle. However, the lender must only repossess the vehicle during business hours and without "breaching the peace". The lender can repossess your vehicle anytime and anyplace, if it can be done without breaking the peace. This means that harassment or physical force by a locksmith to obtain the vehicle gives you a legal reason to stop the repossession.
A lender cannot repossess your vehicle if you have filed a Chapter 13 bankruptcy case. Repossession is a violation of the automatic stay and therefore will subject the lender to sanctions imposed by the Bankruptcy Court.
Furniture and household items
This category includes appliances, tools, technology, machinery, art, jewelry, and other personal property that you could reasonably expect to see in someone’s home, except for clothes, personal photographs, and food (not including alcoholic beverages).
Electronic Equipment including mobile phones
Electronic equipment includes computers, phones, TVs, digital cameras, stereos, DVD players, etc. This category also includes home appliances, home gym equipment, exercise equipment and disc drives. The device need not have an Internet connection to be repossessed. Therefore, lenders may disable any mobile phone or digital camera when it is returned. The lender may recharge the battery in the device before reselling it. Repossession is popular because items are outdated quickly. Lenders make good money selling items at auction. For this reason, lenders are usually forgiving when you call to negotiate payment plans.
Digital Storage or Subscription fees
This includes digital storage, television and music subscription fees. Also, users should know that some online services will "ban" the account of a customer who has not paid its bills. For example, Dish Network recently placed a hold on customers’ Netflix accounts because of Dish’s failure to pay its bills.
Online mobile Apps
The popularity of online mobile apps has made them a desirable item for repossession. Theft would be a serious problem for tech companies if they didn’t have control over the accounts of their customers. Therefore, certain restrictions are placed on these types of digital downloads, including apps.
Legal Repossession Process in North Carolina
The legal process of repossession in North Carolina is governed by Article 9 of Chapter 25 of the North Carolina General Statutes. Repossession can occur when a borrower defaults on their loan, meaning they have not made their payments according to the loan agreement. When this happens, the lender (e.g. the bank) has the right to take possession of the collateral which was pledged for the loan. Generally, the loan agreement will list the collateral offered for the loan. If the collateral is real estate property, the lender is required to present a foreclosure notice foreclosing on the Property (not a recovery/take possession notice). If the collateral is a vehicle, the lender is required to present a recovery note and may not impound the vehicle after recovery. If the collateral is personal property, the lender has qualified immunity from liability for repossession as long as the lender has not breached the peace.
Repossession occurs with either judicial or non-judicial sale of the collateral. In a judicial sale, the lender must file a lawsuit in the appropriate court and obtain an order under 25-9-610 to direct the sale of the collateral. In a non-shop sale, in which a lien on the Property is foreclosed through court order or repossession pursuant to a security interest, the sale is by public auction held in the county in which the disposition occurs. The creditor must give reasonable notice of the time and place of the sale to each grantor of the collateral, each perfected secured party, and any other person from whom the creditor has received written notice of a claim. In addition, the creditor must send a public notice of the sale in a publication of general circulation in the county where the sale will take place. In a commercially reasonable disposition, the notice must state the time and place of the sale, describe the collateral, list the date, time, and place of public auction, and include a description of the services of a 25-35 licensee performing at the auction. In a private sale, the creditor must send a written notice to each grantor and other secured parties who received prior written notice of the creditor’s right to take possession of the collateral. If the sale is at a public auction, the notice must be given within a reasonable time before the date of the auction. In a non-compliant sale, the borrower may recover against the lender for actual damages or the credit or refund of incidental expenses incurred as a result of the violation.
Rights of the Borrower When Repossessed
One of the most common violations I see with auto lender repossession is when the lender or a repo company does not provide notice before repossession. The law requires proper notification prior to repossession unless the property is in plain view. The law requires a lender to "demand payment or perform" that "the debtor be given a reasonable extension of time." Unfortunately, the timeframe may not feel reasonable if the debtor is in crisis, but the time period is at least five days. Sometimes borrowers are told they have missed payments but they haven’t been given a final "demand payment". Borrowers should not rely on hearsay, and they should continue to make payments until they get that written demon. Borrowers can get a 10 day temporary restraining order if repossession provides them with a legal claim. The basic repossession law is provided below. The borrower’s repossession rights are governed by Article 9 of the Uniform Commercial Code, holding that secured lenders must take reasonable care to safeguard and preserve the collateral.
§ 25-9-609. Secured party’s right to take possession after default. After default, a secured party: (1) May take possession of the collateral; and (2) Without removing it, may render equipment unusable and disable a place to which it has access. § 25-9-610. Disposition of collateral after default; entitlement to deficiency judgment; right to redeem collateral. After default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing. Dispositions may be by public or private proceedings, and may consist of one transaction or a series of transactions, and may be conducted on or off the premises and during or after usual business hours. Dispositions may be by way of one or more contracts, either to merchants (other than consumers) or consumers.
How to Avoid and Challenge Repossession
A secured creditor must give a borrower Notice of Intent to Repossess before it can lawfully repossess collateral. If a secured creditor fails to provide the required notice, the borrower becomes immediately current on all debt owed to the creditor, including attorney fees, while the creditor may bring an action for a pre-repossession judgment for any deficiency. This procedure does not appear to be used in actual practice.
The debtor can and should dispute a repossession if it is not conducted in compliance with the law or if there is no basis to repossess the collateral. Lending institutions often do not have the capacity to hire repossession agents who follow the law and make reasoned determinations , rather than emotional or hasty ones. When there is a disagreement about the right to possession, the secured creditor should initiate a court action to repossess or replevy the collateral and the debtor should contest the creditor’s right to possession in court and seek an appropriate remedy.
If a debtor has been subjected to abusive collection practices, he should report them to the Consumer Financial Protection Bureau and/or the North Carolina Attorney General.
Consequences You will Face When Repossessed
In North Carolina the collateral that was repossessed may be sold online or outside of a store front to help the creditor recoup some of its losses. If the collateral is sold for an amount less than what the borrower owes, the borrower is still responsible for the difference, referred to as the deficiency. The deficiency amount is calculated by subtracting the sales price from the total amount due. Other costs including collection costs and attorney fees may also be added to the total amount due. The lender can obtain a deficiency judgment against the borrower for the entire deficiency. Liability for the deficiency amount applies specifically to the particular borrower on the loan agreement. Where more than one borrower is listed on the loan agreement, each borrower is liable for the entire deficiency amount. It is not sufficient for a co-borrower to simply agree to pay the deficiency without having a signed agreement in writing. For the same reason, it is also important for co-borrowers to make a clear written understanding, in the event the collateral was returned in lieu of repossession, that they are jointly responsible for paying the deficiency.
Frequently Asked Questions About Repossession Laws in NC
Repossession, a legal process by which a lender can reclaim an asset due to borrower default, is a subject of interest for many. Below are frequently asked questions about repossession laws in North Carolina:
What assets can be repossessed in North Carolina?
Real property, vehicles, boats, and other personal collateral can be reclaimed. Note that real property must be foreclosed upon through the court system.
What are "automatic stay" provisions and how do they affect repossessions in NC?
An automatic stay is a legal process by which a creditor is prevented from commencing collection proceedings during the period following the filing of a bankruptcy proceeding. Simply put, if a debtor files for bankruptcy , creditors cannot initiate repossession proceedings until after the matter is resolved (typically within six months).
Can I be charged attorney fees and other costs associated with a repossession?
Most lenders have clauses in their loan documents which that entitle them to charge attorney fees and other costs to collect the owed balance or foreclose on the collateral.
Do debtors have the right to redeem collateral – ie, to buy back what has been repossessed?
The right to redeem is controlled by statute. In some cases, debtors have a statutory right to redeem property within a specified time following repossession, but no more than six months later.
Are laws governing repossession the same throughout the state?
No. State law governs repossession and the process varies from one county to another throughout North Carolina. It is always wise to consult a local attorney.