Repossession Laws in Iowa

Car repossessions are common and even expected because of the way a car loan is structured. Your car loan agreement is designed around you, the borrower, making monthly payments. If you don’t make those payments, the car itself is “on deck” to satisfy your obligation to the creditor/lender. This gives the creditor a security interest in your car and makes your automotive loan a secured loan. 

In Iowa, your loan documents must clearly show the lender a security interest. If they don’t, your auto financing isn’t a secured loan and your lender can’t repossess your car. They can only demand the late payments. Each state has different laws for how car repossessions work, and what parties on each side need to do. This article will look at the rules and rights for auto repossession in Iowa.

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

You must be at least 10 days past due on your car payment or have met the terms of default spelled out in your loan agreement to be at risk for auto repossession.  

Will I Be Notified Before the Repossession? How?

If you’re facing repossession, you might not feel lucky. But as an auto owner and borrower in Iowa, you have more consumer protections than borrowers in other states. Under the Iowa Consumer Credit Code, creditors are required to send you a written notice of your right to cure. Curing means fixing the violation of the loan agreement (usually by catching up with payments). 

This notice gives you 20 days to make the missed payment or correct your contract default before your creditor can attempt to repo your car. This consideration from the Iowa Code isn’t without limits. Keep in mind that if you’ve been late more than once in the past 365 days, your lender is only required to send you one right to cure notice a year.

How Can I Prevent a Repossession?

You have one month to try to make up any missed payments before repo can occur. That’s the 10 days after the default plus your 20 day right to cure. If you fell behind on your payments due to a financial rough patch, you might not have the funds to do this. But you still have other options that could help you avoid the repo. These options include refinancing, selling your car, and filing for bankruptcy.

But first, it’s worth simply picking up the phone and calling your lender as soon as you know you might have a late or missed payment. Repossessing your car and selling it in the hopes of making back some of the money you owe isn’t ideal for your lender. They would much prefer to continue to receive your loan payments and all the interest they accrue. If you can assure your lender that your situation is temporary and that you are committed to making up the payments, the lender may offer you a new repayment plan or forbearance, which temporarily pauses your payments.

What Can Repo Companies in Iowa Do? 

A repossession company can remove your car from your open driveway, public/private lots, and any other places without your permission. But repo agents can’t enter your home to take your car without your consent. Under Iowa repossession laws your home includes your garage or any area behind a locked gate.

Repo companies don’t have to have a license to operate in Iowa. This means they can operate without much oversight or regulation. But they do have to avoid breaching the peace when they take your car. A breach of the peace can involve anything from verbal threats and trickery to physical force. If you verbally object to the repossession while it is happening and the repo agent doesn’t stop, that’s also breaching the peace. 

Protect yourself by documenting the repossession. Write down the date and time, the repo agent’s information, and any witness information. Take photos and video. Call the police if necessary, and if you’re comfortable doing so. All this evidence could prove invaluable in a claim against the repo agency and could even end up barring your creditor from repossessing your car.

You also need to avoid breaching the peace by using threats, tricks, or physical aggression during the repo. If you don’t, you could end up injured or arrested. Also, anything you do to prolong the repo process — like trying to hide your car or attacking the repo agent —will lead to increased repo fees. These fees eventually become part of your car loan balance.

What About the Personal Property in My Car? 

If you know you are at risk of having your car repossessed, remove all personal items from your car as soon as you can so you don’t have to deal with getting them back. If your car has already been repossessed with your property inside, contact your lender to let them know you need your stuff back. They should tell you when and how to retrieve your property. They can charge you fees for storing your property, but they can’t charge you to return the items.

What Happens After a Repossession in Iowa? 

Your creditor can choose to keep your car to satisfy your loan obligation, but usually, the lender will sell your car at auction. You should receive a detailed Notice of Sale before this happens. The notice will tell you the time and date of the sale, so you have a chance to attend the auction if you choose. 

The lender’s efforts to sell your car have to meet a “commercially reasonable” standard. This means they have to try to get the best price for your car under the circumstances. This is intended to prevent shady situations like where the lender’s best friend buys your car for far below market value without anyone else having a chance to bid. Courts look at the entire situation to determine if the seller’s efforts were “commercially reasonable.” Private sales can be legitimate so long as the lender sells the car for a price close to fair market value.

Do I Still Owe After a Repossession in Iowa? 

The price your car fetches at auction plays a big part in determining if you still owe after the repo. The sale proceeds get doled out in the following order:

1. The costs of the repossession, which can include the repo agent’s fees, towing, and storage. You can reduce these fees by doing a voluntary repossession.

2. The costs of auctioning off your car, which can include any repairs to your car, advertising fees, and auction fees.

3. The balance of your loan.

If there’s money left over after these costs have been paid, it belongs to you. If the sale price of your car doesn’t cover the above costs you’ll owe your lender a deficiency balance. This often happens to borrowers who were upside-down on their car loans to begin with. 

The lender has the right to sue you for this amount and get a court order called a deficiency judgment. This judgment can be used to garnish your wages. Thankfully in Iowa, consumer creditors like auto lenders are limited in how much they can take through wage garnishment. Still, it may be a good idea to contact your lender to try to settle your deficiency out of court.  

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

After your car is repossessed, you should receive a Notice of Sale. This notice should include details on how to redeem (get back) your car before it is sold. This may involve paying back all missed payments plus repossession fees.

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

• Auto Repossession from Iowa Legal Aid 

• Wage Garnishment from Iowa Legal Aid

• 211 Iowa lists legal aid services across the state

• The Iowa State Bar Association lists several options for low-cost or free legal assistance

COVID-19 Hardship Information 

• Some auto lenders are offering auto loan relief for individuals experiencing financial hardship due to COVID-19, but you have to contact them.