Repossession Laws in Michigan

When you buy a car with a loan, you normally give your lender a security interest in your vehicle. A security interest means that your creditor can take, or repossess, your vehicle if you default on the loan. A leased car can also get repossessed if you don’t follow the terms of the lease contract. State law determines how creditors are allowed to repossess motor vehicles and whether borrowers have a right to redeem the vehicle or can be sued for any remaining loan balance after the car is sold. This article is about the repossession process in Michigan.

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

Michigan repossession law allows a creditor to repossess your car at any time after you default on your car loan or lease. The most common reason for default is not making your car payments. You can also default if you don’t follow the terms of the lease like keeping the proper insurance coverage. Your loan or lease contract will tell you exactly when a default occurs. 

Will I Be Notified Before the Repossession? How?

Michigan is a self-help repossession state. That means the lender can repossess your car as soon as you’re in default, without getting a court order. Your lender doesn’t even have to send you advanced notice. The only warning you might get is a reminder from your loan servicer in a late payment notice that your car can be taken for nonpayment.

How Can I Prevent a Repossession?

If possible, the simplest way to prevent a vehicle repossession is to catch up on your car payments and any outstanding late fees. To find out how much time you’ve got to catch up, you’ll need to review your loan documents or your notice of default. It’s usually best to call your loan servicer to make a late payment by phone because mailed payments can get delayed and some online payment systems make it hard to pay on past-due accounts.

If you’re temporarily unable to make timely payments, you should call your loan servicer right away to see if there’s anything you can do to avoid default. Depending on the circumstances, your lender may give you a forbearance, which pauses your payments temporarily. Or you may even get a permanent revision of your payment schedule. Depending on your overall financial situation, you may also want to consult a bankruptcy attorney to see if filing a Chapter 13 bankruptcy can help save your car.

What Can Repo Companies in Michigan Do? 

Car repossession laws are typically found in states’ Uniform Commercial Code (UCC), which is a set of laws that govern sales and other commercial transactions. Repossession companies are essentially a specialized form of debt collectors, so the state of Michigan requires them to hold a valid collection agency license and be bonded.

Under car repossession laws, repo agents can’t breach the peace when they take a vehicle. This means they can’t use violence or threats of violence, and they can’t use police intervention without a warrant. They also can’t trick you into giving them access to your car or enter a gated area or a structure like a closed garage to take a vehicle. 

A repo agent is allowed to take your car right out of your driveway or from a place that you take it, like a repair shop. 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 may consider this a breach of the peace. You should never block the agent or use physical force against the agent, even if you believe the repossession is wrongful because those actions could result in violence and/or having criminal charges filed against you.

What About the Personal Property in My Car? 

A lender can’t keep or sell the personal property you left inside your car. You should receive a notice telling you how to retrieve these items. If you know you’re at risk of repossession, you should remove all of your personal items from your car so you don't have to deal with getting them back after your car is taken. 

What Happens After a Repossession in Michigan?

A repossessed vehicle usually gets sold at a public auction or private sale. You should get notice of when and where the sale will take place. Michigan car creditors are required to sell repossessed vehicles in a commercially reasonable manner, which means they have to sell them the same way they’d sell other vehicles and get a fair price. If the sale is at a public auction, you’ll be able to bid on your own car.

Sale proceeds will be applied first to the lender’s costs of repossession and repo fees and then to any amount you owe on the auto loan. Besides your loan’s balance and interest, this amount may include items like lease termination fees or loan prepayment penalties, if they apply. If the auction’s proceeds are more than enough to cover everything owed, you may be entitled to receive the surplus funds. 

If the proceeds of the sale aren’t enough to cover everything you owe (this is likely if you’re upside-down on the car loan), you’ll owe the resulting deficiency to the lender. Michigan repossession law allows borrowers to be sued for this deficiency balance.

Do I Still Owe After a Repossession in Michigan? 

After a car is repossessed, the lender adds its costs plus any fees owed under the loan contract to the total amount the borrower owes. The auction’s proceeds will reduce this liability, but you’ll still owe the deficiency if the sale amount is less than the total you owe. If you voluntarily return your car to the lender prior to repossession, you might be able to reduce your deficiency balance somewhat by avoiding having to pay repossession costs.

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

You can redeem your car and get it back after repossession. The notice you get from the repo company will tell you the deadline to redeem the car.  To do so, you may have to pay off the full loan amount (not just the past-due payments). You’ll also have to pay any other fees or costs you owe. This could include storage fees, sale preparation costs, attorney fees, and other fees. The pre-sale notice you receive should have a phone number to call to find out the exact amount due and how to redeem your vehicle.

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

• Michigan Law on Repossession

• Information on the Seizure of Personal and Real Property to Pay a Debt from Michigan Legal Help.

• Advice from the Michigan Attorney General’s office on how to protect against repossessions. 

• Legal Services of Northern Michigan has information on consumer protection laws and provides legal assistance to low-income Michiganders. 

• The State Bar of Michigan has a useful Legal Resource & Referral Center. They also offer low-income individuals legal assistance on repossession cases.

• Lakeshore Legal Aid provides legal assistance on civil matters to low-income individuals, seniors, and domestic violence and sexual assault survivors in Michigan.

• The Federal Trade Commission has information for consumers on vehicle repossessions and how to file complaints against lenders who don’t follow repo laws.