In some situations, your personal property may be taken from you, without a judgment or court order, if you fail to make payments due and the creditor has a security interest in the property. This report summarizes the laws regulating repossession of consumer goods.
A "security interest" is the interest the lender takes in the merchandise you purchase on credit. When you buy on credit, you agree that you will not fail to pay the lender the money you owe. Failing to pay is known as default. The "security interest" is created when you and the lender both sign a security agreement.
What the Law Says
New York law states that a lender or seller may take possession of the secured goods, on default, without going to court. The secured creditor also may, without removing the goods, render such goods unusable.
Consumers should be aware of the following provisions of the law:
- The creditor does not have to give you any notice before coming to take away the goods.
- Default is defined in the contract signed by you and the seller. Typical events which will trigger default that creditors often insert in such arrangement include the following:
The Bureau recommends that you read your agreement carefully and understand all of its terms and conditions before you sign it.
- failure to pay debts as they become due;
- failure to insure the goods;
- bankruptcy of the debtor;
- death of the debtor;
- refusal to allow examination of the goods.
- It is up to the creditor to decide how and when repossession will be accomplished. The only limitations upon the creditor are that he/she not breach the peace and that he/she proceed in a reasonable manner.
After Your Property is Repossessed
- The secured party (the seller or lender) may sell your property by public auction or private sale. Such sale must be reasonable in terms of the method, manner, time, place and terms.
- You have the right to be notified of the time and place of a public sale and/or of the time after which a private sale you goods will be made.
- If you have paid the seller sixty percent (60%) of the cash price for the goods he/she repossesses, or 60% of your loan from a lender, the seller or lender must sell your repossessed goods within 90 days. If you have paid less than 60% of the amounts due, the creditor does not have to sell the goods and he/she can keep both the goods and your money. When your creditor sells your repossessed goods, the money he/she receives goes first to his/her expenses from repossessing and selling the goods, then to satisfaction of the debt. If there is any money remaining, you will receive it. If your creditor did not receive enough money from the sale, he/she may sue you to make up the difference.
- Until the creditor sells the goods, you have the right to pay all of yourdebt plus the creditor's expenses in repossessing and preparing to sell the goods (including reasonable legal expenses). The creditor must then return the goods to you.
Motor Vehicles and Motorcycles
New York law requires a creditor who repossesses your motor vehicle or motorcycle to notify you personally, or by special delivery first class mail, within 24 hours of such repossession. Such notice must also be given to the nearest motor vehicle district office and must include the name and address of the person, firm, or corporation repossessing the vehicle.
If your motor vehicle or motorcycle is being held under a lien for repairs or storage, the holder of the vehicle must return to you any registration plates for such vehicle upon your request within 24 hours. If the creditor fails to do this, he/she must personally deliver or mail by special delivery first class mail, a notice of such holding and the number plates of such motor vehicle or motorcycle to the nearest motor vehicle office.