Michigan Repossession Laws: What You Need to Know

Repossession happens when a lender takes back your car after you default on your auto loan. Michigan has specific laws that govern this process. Understanding your rights can help you protect yourself and explore your options.

You need to know what triggers repossession, what repo companies can legally do, and how to get your car back. Knowledge is power when dealing with vehicle repossession.

How Many Missed Payments Before Repossession in Michigan?

Your lender can repossess your car as soon as you default on your loan or lease. Missing payments is the most common reason for default. Breaking other contract terms also counts as default.

Your loan agreement spells out exactly what triggers default. Being even one day late could give your lender the legal right to repossess. Many lenders wait until you’re further behind. Legally, they don’t have to wait at all.

Default isn’t only about missed payments. Failing to maintain required insurance can trigger repossession. Violating other contract terms can too.

Will You Get Notice Before Repossession?

Michigan is a self-help repossession state. Your lender can repossess your car without getting a court order. They don’t have to send you advance notice either.

The only warning you might receive is a late payment notice. That notice may remind you that your car can be taken for nonpayment. Some borrowers wake up to find their car gone.

How to Prevent Your Car from Being Repossessed

The simplest way to prevent repossession is catching up on your car payments. You’ll also need to pay any outstanding late fees. Review your loan documents to find out how much time you have.

Call your loan servicer immediately if you’re struggling with payments. Mailed payments can get delayed. Online payment systems sometimes make paying past-due accounts difficult. Phone payments work best when you’re behind.

Your lender might offer a forbearance if you’re temporarily unable to pay. Forbearance pauses your payments for a short period. You might even get a permanent revision of your payment schedule.

Contact your servicer before you fall behind. Being proactive can save your car. Our partner Cambridge Credit Counseling can help you create a payment plan that works with your budget.

What Repo Companies Can Legally Do in Michigan

Repo agents can take your car if you’re in default. They can take it from your driveway or even a repair shop. Michigan gives repo companies broad authority to reclaim vehicles.

You can tell the agent to stop and leave if you’re present during repossession. If they continue after you object, that may count as breach of peace. Don’t physically block them or use force. Doing so could put you at risk of harm or criminal charges.

Breach of Peace Rules

Repo agents cannot breach the peace during repossession. They can’t use threats, violence, or call police without a warrant. Tricking you into giving them access to your car is also illegal.

Agents cannot enter locked or private spaces. Gated areas and closed garages are off-limits. They must have clear access to your vehicle without breaking these rules.

Michigan requires repo companies to hold a valid collection agency license. They must also be bonded. These requirements exist because repo companies are considered debt collectors.

Your Personal Property Rights

Your lender cannot keep or sell personal items left inside your car. You should receive a notice explaining how to retrieve these belongings. The notice will include contact information and pickup procedures.

Remove all personal items from your car if you’re at risk of repossession. You won’t have to deal with retrieving them later. Personal belongings include work tools, clothes, documents, and anything else you own.

What Happens After Your Car Is Repossessed

Your lender will sell your car at a public auction or private sale. You’ll receive notice of when and where the sale will happen. Michigan law requires lenders to sell repossessed vehicles in a commercially reasonable way.

Commercially reasonable means getting a fair price using standard sales methods. You can show up and bid on your own car at public auctions. Many people successfully buy back their vehicles this way.

How Sale Proceeds Are Applied

Money from the sale first covers repossession costs and fees. Then it goes toward your loan balance. Your balance might include lease termination charges or early payoff penalties.

You may get extra money back if the sale brings in more than you owe. Unfortunately, sales usually don’t cover the full amount owed. Most repossessed cars sell for less than their retail value.

Understanding Deficiency Balances

A deficiency balance is what you still owe after the sale. You’ll have a deficiency if the car sells for less than you owe. Michigan lenders can sue you to collect this amount.

Deficiency balances are common when you owe more than your car’s worth. Being upside down on your loan almost guarantees a deficiency. Your lender will add repossession costs, storage fees, and sale preparation costs to this balance.

Voluntarily returning your car before repossession can reduce the deficiency. You won’t be charged for repossession costs. You’ll still owe the difference between the sale price and your loan balance.

Getting Your Car Back After Repossession

You can redeem your car by paying off the full loan amount. The notice from the repo company includes the redemption deadline. You typically need to pay everything you owe, not just past-due payments.

Additional fees will be added to your payoff amount. These include storage fees, sale preparation costs, and attorney fees. Call the number on your pre-sale notice to find out the exact redemption amount.

Redemption can be expensive. You’ll need to pay thousands of dollars within a short timeframe. Most people struggle to come up with redemption funds quickly.

Your Options When Facing Repossession

You have several options if you’re facing repossession or dealing with a deficiency balance. Each option has different consequences for your finances and credit.

Negotiate a Payment Plan

Your lender might accept a payment plan for catching up on missed payments. Contact them immediately to discuss options. Our partner Cambridge Credit Counseling specializes in negotiating affordable payment plans with auto lenders.

Refinance Your Auto Loan

Refinancing could lower your monthly payment. You’ll need decent credit and income to qualify. Refinancing won’t work if you’re already too far behind.

Challenge an Illegal Repossession

You can sue if the repo company breached the peace. You might also challenge improper notice or unreasonable sale practices. Consult a consumer protection attorney to evaluate your case.

File for Bankruptcy

Bankruptcy can stop repossession immediately through automatic stay. Chapter 13 bankruptcy lets you catch up on car payments over time. You keep your car while making affordable payments through a repayment plan.

Chapter 7 bankruptcy discharges deficiency balances from past repossessions. You’ll eliminate the debt completely. Speak with a bankruptcy attorney to understand which chapter fits your situation.

Michigan Repossession Resources

Several organizations provide free legal help for Michigan residents facing repossession:

• Michigan Legal Help: Offers information on property seizure to pay debts, including vehicle repossession.
• Legal Services of Northern Michigan: Provides legal assistance to low-income residents on consumer protection matters.
• State Bar of Michigan Legal Resource & Referral Center: Connects you with attorneys who offer reduced fees for qualifying individuals.
• Lakeshore Legal Aid: Serves low-income individuals, seniors, and domestic violence survivors with civil legal issues.
• Federal Trade Commission: Provides consumer information on vehicle repossession and accepts complaints against lenders who violate repo laws.

These organizations can help you understand your rights and options. Don’t wait until after your car is gone to seek help.