Lawful and Unlawful Repossession Lawyer Manual

Valid security interest required

A repossession is lawful only when the creditor has a valid security interest in the consumer's vehicle. This requires that the security interest is written in a retail installment contract or a financing agreement and in the case of vehicles, noted on the certificate of title or approved form provided by the Secretary of State. “There must be some language reflecting the debtor’s intent to grant a security interest.” In re Sabol, 337 B.R. 195, 198 (Bk. Ct. C.D. Ill. 2006). If there is no valid security interest, a creditor cannot repossess the property.

Repossession

The debtor loses possession of the property, which can only be regained through redemption procedures, or if the repossession is unlawful (see below). The creditor may or may not re-sell the property, but if there is a re-sale, the creditor can go after the debtor for any deficiency in the remaining debt. 810 ILCS 5/9-615(d). Also, the creditor can charge the debtor the cost of repossession, which may include costs to prepare the property for resale, towing charges, storage charges, and the like. 810 ILCS 5/9-615(a).

Unlawful repossession

If repossession is unlawful, the consumer has the right to get the property back and to be paid money damages. There are a variety of situations which could make the repossession unlawful:

• The debtor was not in default at the time of repossession either because the debtor did not owe any payments or still had time to make the payments. Check for a history of the creditor accepting late payments or an agreement to allow a late payment (there may be an estoppel argument if no subsequent warning)
• The debtor did not put up the property as collateral on the contract, or if for some other reason the creditor does not have a valid security interest under the law. For example, the repossessed car may not be in the debtor’s name, or the creditor took the car as collateral on an earlier loan, but not on the present defaulted loan
• The repo man breached the peace when taking the car. This can happen when they take the car over the debtor’s objections made in person at the time of the repo, or by using force or threats, or by breaking into a locked garage or otherwise destroying the personal property of the debtor. See Pantoja-Cahue v. Ford Motor Credit Company, 375 Ill. App. 3d 49 (1st Dist. 2007).
• Wrongful repossession may be pleaded as the tort of conversion, a violation of the Illinois Commercial Code, or an unfair practice under the Illinois Consumer Fraud Act