When you buy a car, truck, or other vehicle on credit, your creditor retains important rights in the vehicle until you have made your last payment. These rights are established by the contract you signed and by state law. The failure to make timely payments carries serious consequences. Your creditor then has the right to "repossess" - take back - your car without going to court, or without warning you in advance. However, state law does place limits on how the creditor may repossess the vehicle and resell it to reduce or eliminate your debt. Consider the following:

TIPS FOR CONSUMERS

Contact the Division of Consumer Services.

For further information, you may choose to contact your private attorney or the Georgia Department of Consumer Affairs at (404) 656-3790 or (800) 869-1123.

Talk to your Creditor.

Since it is difficult to dispute a repossession once it has occurred, contact your creditor once you realize your payment will be late. Many creditors will agree to a delay if they believe you will pay at a later date.

What is Default?

What constitutes default will be defined in your contract. An example could be failure to make a timely payment. However, if your creditor has agreed to accept your late payment or to change your payment date, then the terms of your original contract may no longer apply. If you do reach an agreement to modify your original contract, make sure it is in writing and signed by both parties to the contract.

Seizing the Vehicle.

Generally, your creditor has legal authority to seize your car as soon as you default on your loan. Once you are in default, your creditor may repossess your car at any hour of the day or night, without prior notice. The creditor may also come onto your property to do so. However, the creditor may not commit a "breach of the peace" by using physical force or threats of force. If a "breach of the peace" occurs, your creditor may be required to pay a penalty or compensate you for any harm done to you or your property.

Voluntary Repossession.

Voluntarily returning the vehicle to the creditor may reduce your creditor's expenses in retaking the car, and may reduce the amount you will owe the creditor. But remember, you will still be responsible for paying any deficiency on your loan, and your creditor may still enter the repossession on your credit report.

Reselling the Vehicle.

Once your car has been repossessed, your creditor may decide to keep the car as compensation for your debt or resell it in either a public or private sale. In either case, your creditor must notify you about what will happen to the car. If the creditor decides that it wants to keep the car, you have the right to demand that the car be sold instead. You may choose to exercise this right especially if the car is worth more than the amount owed on the loan. If the car is sold at a public auction, you must be notified of the date in advance. If sold at a private sale, you will be notified of a date after which it will be sold. Any resale must be conducted in a "commercially reasonable manner." For example, a resale price which is below fair market value may be unreasonable. If this occurs, you may have a claim against the creditor for damages, or a defense against a deficiency judgment. Lastly, you may also be entitled to buy back the vehicle by paying the full amount owed, and any expenses incurred by the creditor. In addition, you may be able to reinstate your loan by paying the amount you are behind on the loan plus your creditor's expenses.

Personal Property Left Inside the Vehicle.

Whatever method is used to dispose of the repossessed vehicle, a creditor may not keep or sell any personal property found inside. This does not include most improvements made to the car, such as a stereo or luggage rack. If your creditor cannot account for valuable articles left in your car, you may be entitled to compensation and you should consult with an attorney.

What is a Deficiency Judgment?

A deficiency judgment is the difference between what you owe on your loan and what your creditor receives when reselling your vehicle. A creditor who has followed the proper procedures for repossession and sale is generally allowed to sue you for a deficiency judgment to collect the loan balance. If your creditor has committed a "breach of the peace," the creditor may lose the right to collect a deficiency judgment. If you are sued, you will be notified of a court date. You should attend the hearing because it may be your only opportunity to raise legal defenses you may have. An attorney will be able to advise you as to whether you have grounds to contest a deficiency judgment.

Consumer Credit Counseling Service.

If you need help in dealing with your debts, you may want to contact the CCCS. This nonprofit organization with more than 850 offices in 50 states will try to arrange a repayment plan that is acceptable to you and your creditors. The counselors will also help you set up a budget and plan for future expenses. These services are generally offered at little or no charge. You can locate the nearest CCCS office by contacting the National Foundation for Consumer Credit, Inc. at 301-589-5600 or 800-388-2227.

Additional Information.

For more information on credit publications, or to obtain a copy of BestSellers - a complete listing of all consumer publications from the FTC - contact: Public Reference, Federal Trade Commission, Washington, D.C. 20580; 202-326-2222. TDD 202-326-2502.