Repossession Laws in Alabama

Can Your Car Be Repossessed in Alabama?

If you took out a loan to buy your car, the lender usually has the right to take the car back if you stop making payments or break the loan agreement. This is because the loan is tied to the car itself — the car acts as collateral for the loan.

In Alabama, there are specific laws that cover when and how a lender or repossession company can take your car. These laws also explain what rights you have before and after a repossession.

This article breaks down how car repossession works in Alabama, what kind of notice lenders have to give you, and what steps you can take to protect yourself.

How Many Payments Can I Miss Without Risking a Repossession in Alabama?

In Alabama, a lender can repossess your car as soon as you're in default on your loan. This often happens after just one missed payment, though it depends on the terms of your loan agreement.

Missing payments isn’t the only way to default. You could also be considered in default if you:

• Let your car insurance lapse (if required by your lender)

• Move the car out of state without permission

• Break other terms listed in your loan contract

Every loan agreement is different, so it's important to read your contract carefully. It should explain what counts as a default and whether you have any kind of grace period before repossession becomes a risk.

In short, there’s no set number of payments you can miss. Repossession can happen quickly — even after one missed payment — if that’s what your contract allows.

Will I Be Notified Before the Repossession? How?

Your lender isn’t required to notify you, the borrower, before repossessing a vehicle. That said, the lender may send you a notice of default letting you know you’ve defaulted on your payment. They may include a general reminder of the risk of repossession in this notice.

Lenders do not need a court order to repossess your car in Alabama.

How Can I Prevent a Repossession?

If possible, the best way to prevent a vehicle repossession is to catch up on your loan payments. You should review your loan contract or lender notices to find out how long you have to catch up, and then call your loan servicer to make a payment by phone.

If possible, pay over the phone and ask for payment confirmation via mail or email. Mailed payments can get delayed and some online payment portals make it difficult to pay on past-due accounts.

If you can't afford your car payment, you should call your loan servicer right away to see if there’s anything you can do to avoid defaulting on the loan.

You might be able to get a temporary forbearance, which allows you to stop making payments temporarily. The lender may even agree to permanently alter your payment schedule or monthly payment amount.

What Can Repo Companies in Alabama Do? 

Car repossession laws allow repo companies to take your car off the street or right out of your driveway. But repo agents can’t breach the peace when they take a vehicle. That means they can’t use violence, threats of violence, or force.

If you’re present during the repossession, you can ask the agent to stop and leave your property. If the agent continues anyway, the court could later consider this a breach of the peace.

You should never block the agent or use physical force against the agent, even if you believe a car repossession is wrongful. Doing so could result in violence and/or criminal charges against you.

Alabama state doesn’t require repossession companies to have any special licensing. 

What About the Personal Property in My Car? 

A repossessor can’t keep or sell the personal belongings left inside a repossessed vehicle. You should receive a notice telling you how to retrieve these items. If you don’t, you can call the number on your last written notice.

If you know you’re at risk of losing your car, remove all your personal items from the vehicle so you don't have to deal with getting them back later.

What Happens After a Repossession in Alabama?

You’ll get a written notice before your lender sells your car either at a public auction or in a private sale. The law requires the lender to send this notice within a reasonable time after the repossession, but it doesn’t say exactly what’s considered reasonable. The notice should give you the time and place of a public auction or the time after which a private sale will occur.

If a public auction is scheduled, you’ll be able to bid on your own car. The notice should also contain information about your liability for any deficiency balance, a phone number to call about how to redeem (get back) the vehicle, and contact information to get more details.

How Public Auctions Work for Repossessed Vehicles

Lenders are required to sell repossessed vehicles in a commercially reasonable manner, meaning they must be sold in the same way as other cars and for average market price. The lender will apply the sale proceeds in the following order:

1. Its repossession expenses, including the cost of towing/repossessing, storing, and preparing the car for sale.

2. The balance of the loan, which is what you had left to pay on the loan plus any late fees, interest charges, or other additional charges required by your loan documents.

3. Subordinate lienholders, if there are any. 

4. Co-signers on the loan, if there are any. 

Since the money the car brings in from the sale doesn’t just go to repay the loan, many borrowers are left with a deficiency balance.

For example, if you owed $5,000 on the car and the lender paid $1,000 in repossession costs and fees, you’d owe a total of $6,000. If the car sells for $4,500 at auction, you’ll be left to pay the $1,500 deficiency.

You’re more likely to have a large deficiency balance if you were already upside-down on the loan, meaning you owed more than your car is worth.

In rare cases, there may be a surplus. If there is, you’re entitled to receive it.

Do I Still Owe After a Repossession in Alabama? 

Yes, in most cases, you’ll still owe money even after your car is repossessed.

Here's how it works:

After repossessing your car, the lender will usually sell it and apply the sale amount to your loan balance. But they’ll also add repossession costs, late fees, and any other charges allowed under your loan agreement. If the sale doesn’t cover everything you owe, the remaining amount is called a deficiency balance — and you’re still responsible for paying it.

One way some people try to reduce how much they owe after repossession is by voluntarily surrendering the car before the lender takes it. This can help lower the deficiency balance by avoiding the extra costs of towing, storage, and repossession.

If you’re facing repossession, it may be helpful to review your loan agreement and consider talking to a nonprofit credit counselor or consumer attorney about your options.

Can I Get My Car Back After a Repossession in Alabama?

The lender’s pre-sale notice should contain information about how to redeem (get back) your car before the sale. If the notice provides a phone number to learn more about redemption, you’ll want to call that number quickly to make sure you understand the process and the deadlines.

The law allows you to redeem a repossessed car at any point before the lender has sold the car or entered into a contract to sell it. The lender is allowed to require a full loan payoff in addition to any late fees, the lender’s costs of repossession, and attorney’s fees.

Where Can I Find More Information About Repossession Laws in Alabama? 

• AlabamaLegalHelp.org has information on repossession and a guide to free and low-cost legal aid, assistance, and services in Alabama.

• Legal Services Alabama can provide legal assistance and advice if you have questions about how a lender or repossession company performed a repo.

• The Federal Trade Commission (FTC) has information on how to avoid a vehicle repossession and what your rights are as a consumer.

• Alabama's Commercial Code lays out the state’s repossession laws and borrower’s rights.