Repossession Laws in Massachusetts

Most people need to get a car loan to purchase a vehicle. When you finance a car, you sign a contract with the lender that allows them to take the vehicle back if you default on the loan. The lender has this right because the debt you owe them is secured by your car, which acts as collateral. When the lender retakes the car due to default, the process is known as repossession. Massachusetts lenders must follow state laws when repossessing your car, and there are laws that protect your rights during the process as well. 

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

When you fail to pay back a loan, you’re considered to be in default. Under Massachusetts law, if you miss one or more payments, you’re in default and at risk of repossession. Your auto loan contract will give you the specifics.

Before the lender can proceed with repossession, they must give you written notice and you must have been in default for 10 or more days. This notice must state that you have a minimum of 21 days after the notice is mailed to cure the default. Curing the default means fixing the issue. Often this means making up missed payments, plus any late fees. If the lender allows you to do this, this will reinstate the loan, which allows you to continue paying on it as normal. Some lenders won't allow you to reinstate your loan. In this case, you’ll have to pay the loan in full (not just the past-due amount), along with late fees and any costs the lender has incurred in the process if you want to get your car back. 

Will I Be Notified Before the Repossession? How?

After the loan has been in default for a minimum of 10 days and before proceeding with repossession, the lender must either give you or mail you a written notice. This will be titled, “Rights of Defaulting Buyer Under the Massachusetts Motor Vehicle Installment Sales Act.” This repossession notice will state how much you need to pay and when you need to pay it to get out of default and continue with the loan. 

The notice must clearly identify that it is in reference to your motor vehicle, and it must give you a minimum of 21 days from the date it was mailed to make your payment. If you fail to comply with the notice, the lender can proceed with repossession. 

How Can I Prevent a Repossession?

The best way to prevent a repossession is by being proactive when purchasing your motor vehicle and ensuring your payment is affordable. Look for favorable financing terms, make a down payment, and don’t trade cars often. These steps can also help you avoid becoming upside-down on your car loan, which happens when you owe more than your car is worth.  

You can also prevent a car repossession by: 

• Talking With Your Lender: Contact your lender and ask if you can modify your loan payments so they’re more affordable. If you’re experiencing a temporary hardship, ask if they allow payment forbearance, which temporarily pauses your payments.

• Filing Bankruptcy: If you file either a Chapter 13 bankruptcy or a Chapter 7 bankruptcy you may be able to keep your motor vehicle. 

• Paying the Amount Due: Paying the current amount due under the terms of the loan agreement is another possible way to prevent having your car repossessed. 

What Can Repo Companies in Massachusetts Do?

A repossession company is a debt collection company that contracts with lenders to repossess motor vehicles. In Massachusetts, the lender can do a self-help repossession, which means they repossess the car without getting a court order. Or they can get a court order after attending a hearing. If there’s no hearing regarding the matter and the repo company is performing a self-help repo, the agent may only repossess the vehicle if it can do so:

• Without the use of force,

• Without breaching the peace, and 

• Without entry onto your property UNLESS you consent to this at the time of the entry.

Under Massachusetts law, the repo company must contact the police to report the repossession within one hour.

What About the Personal Property in My Car?

If there’s any possibility that your car will be repossessed, remove all your personal belongings. If your vehicle is repossessed with your personal items in it, it’ll cost you time and potentially money to retrieve them. If belongings are left in the repossessed vehicle, the lender is required to allow you to retrieve your personal items. You can contact the lender to make arrangements to get your property back.

What Happens After a Repossession in Massachusetts?

You’ll have 21 days after your car has been repossessed to get it back. To do so, you must pay the lender the past-due amount under the terms of the loan agreement. This may include late fees and any reasonable costs the lender has incurred in repossessing the car. 

If you don’t get your car back within 21 days, the lender is allowed by state law to “sell or otherwise dispose of the collateral.” If the lender decides to sell the car, it must do so in a commercially reasonable manner. This means the lender has to make an effort to sell the vehicle for its fair market value. The lender should notify you by mail of the day and time of the sale. You’re allowed to bid on the car. 

What If My Car Sells for Less Than I Owe?

If you aren’t able to get your car back and the lender sells it, it may sell for less than you owe on it. When this happens, the lender can pursue you for the difference — called the deficiency balance — but only under certain circumstances. 

If the fair market value of your car is less than the amount you owe, the deficiency balance is determined by subtracting the fair market value (rather than the sale price) from the amount you owe. For example, if you owe $6,000 on your vehicle, and it sells for $3,500 at auction, there’s a $2,500 deficiency. But if the fair market value of the car is only $4,500, the deficiency balance would just be $1,500. That’s the $6,000 you owe minus the $4,500 fair market value. This is the amount the lender can try to get from you. 

Also, if the unpaid balance at the time of default was less than $2,000, the lender isn’t allowed to seek the deficiency balance from you. The creditor can only seek a deficiency balance from you if your loan balance at the time of default was $2,000 or more.  

Do I Still Owe After a Repossession in Massachusetts?

You may think having your car repossessed means you’re off the hook for the rest of the loan and other costs. But this isn’t the case. The lender has the right to collect the loan balance and to add any reasonable costs they incurred to repossess your vehicle. You can help keep these additional costs to a minimum by voluntarily surrendering or returning your car to the lender or car dealership that sold it to you. 

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

You can get your car back after it’s repossessed in Massachusetts but you must do so before the lender sells it. This is difficult for many borrowers because you’ll need to pay the lender the past amount due as well as the reasonable costs and fees they incurred during the repossession process. 

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

• What to know if your car is repossessed | Mass.gov

• Massachusetts law about repossession | Mass.gov

• Can my lender take my car if I miss a payment? | MassLegalHelp