Repossession Laws in New Jersey

Auto loans are common types of loans. You may not know that your car loan is called a secured loan. The lender has a security interest in the loan which gives them the legal right to take your car if you don’t make your payments. Lenders do this through a process called repossession. From Newark to Trenton, Middlesex County to Hudson County, many New Jersey automobile owners like you are struggling to avoid or manage an encounter with the repo man. This article explains how motor vehicle repossession works in New Jersey. 

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

In the state of New Jersey, your auto loan is what determines if you're in default and at risk of repossession. Defaulting on your auto loans means you’ve missed payments or violated another term of the loan such as not having required insurance. When you default on your auto loan, your lender can call in the repo man. 

A default can happen as soon as you miss a payment. In some cases, you may have a grace period, which gives you extra days after your payment due date to make your payment before you’re officially in default. It’s critical to review and make sure you understand your contract so you know when you're in default. If you aren’t sure, call your lender.

Will I Be Notified Before the Repossession? How?

New Jersey repossession services can take your car at any time once you're in default. They don't have to give you prior warning or notice. This can be scary but you can proactively face down a repossession by giving your lender a call to discuss your options and removing your property from your car.

How Can I Prevent a Repossession?

It can be depressing that your lender has the right to take your car away, but you aren't powerless. Reach out to your lender as soon as you know you might have a late or missed payment to ask what options you have. Make it clear that you want to honor the terms of your loan but that you’re facing unforeseen circumstances. Tell them you’d appreciate an alternate payment or forbearance plan. Some borrowers mistakenly think lenders won’t want to work with them, but this often isn’t true. Your lender would often rather continue collecting money from you than spend money to repossess your car. 

Some states have laws that allow a borrower time to cure a default after missed or late payments. Curing the default means making up your missed payments, and it’s a way to avoid auto repossession. But in New Jersey, your car is up for auto repossession as soon as you're in default. The state doesn’t decide everything though! Lenders, especially ones that are trying to market themselves as consumer-friendly, may offer additional options. You can review your loan contract to see if you have options to cure a default.

What Can Repo Companies in New Jersey Do? 

Repossession companies are governed by the Uniform Commercial Code (UCC). The UCC says repo companies can repossess your car or render it unusable as long as they don't breach the peace, which includes: 

• Using force

• Threatening or tricking you

• Damaging your property

• Entering your home without consent 

Under the UCC, your home includes your garage or areas behind locked gates. This means you have to give the repo man consent to enter those areas. If they enter without consent, that’s breaching the peace. Repo agencies don't need your consent to enter an unsecured driveway, private lots, or any public space. If you verbally object to the repossession, no matter where it occurs, the repossession agent can't proceed. If they do, it’s a breach of the peace. The repo agency then needs to get court approval to complete the repo. 

The repo man has to follow the rules, but so do you. You can't breach the peace either and that includes physically trying to stop the repo or using tricks like hiding the car in your garage. Getting in the repo agency’s way will only backfire. If they have to make additional attempts to take your car, these fees will be added to your loan balance. Repossession is a difficult emotional situation, but try to stay calm and respectful during the process. If you don’t, you could get injured or arrested after a confrontation. 

You can't trust that your repo agent has been trained to diffuse conflict peacefully or is under supervision because New Jersey doesn’t require a license to operate a repo company. Ensure proper behavior during the repo by recording the day/time and the repo agent’s information. Create a safety net for yourself by taking photos/video, getting any witness information in case you need to contact them later, and even calling the police if necessary. This evidence could prove valuable if you need to make a complaint about the repo agency or file a claim to get your car back. 

What About the Personal Property in My Car? 

The best thing you can do when it comes to your personal property is to remove it from your car as soon as you know you're at risk of a repo. This way you don’t have to deal with trying to get it back. The repo man will take your car regardless of what’s in it, and they can charge you to store your personal items. Call the repo company as soon as you can and let them know what property you want to get back. If they don't respond, try calling your lender and explain what property you're missing.

What Happens After a Repossession in New Jersey? 

After repossessing your car, the lender will likely sell it at an auction. If you’ve paid more than 50% of the loan balance, the lender is required to sell your repossessed car. The lender has to give you notice of the auction date and location at least 10 days before the sale so that you're able to attend and make a bid if you desire. This advance notice is essential. If the creditor doesn’t meet the terms of the required notice, you may have a claim against them under the Uniform Commercial Code or the New Jersey Consumer Fraud Act. 

The lender is also required to make a commercially reasonable effort to sell your car. This means the lender needs to publicly advertise the sale and sell the car for close to market value. If they don’t, you may be able to sue for damages or use this as a defense in a deficiency hearing. 

Do I Still Owe After a Repossession in New Jersey? 

You would think that if the lender takes your car, that would at least mean that you no longer have to pay the loan. Unfortunately, it’s not that simple. When your car is sold, the proceeds of the auction are paid out in the following order:

1. Repossession expenses (repo agent fee, towing, storage, etc.),

2. Sale expenses (prepping the car for sale, advertising the auction, auctioneer fee, etc.), and finally

3. The balance due on your loan. 

As you can imagine, repo and sale expenses can add up quickly and take a big bite out of the proceeds from the sale of your car. This is one of the reasons avoiding the repo man can come back to haunt you and why you might want to consider doing a voluntary repo or voluntary surrender. This simply means that you voluntarily return the car to the lender prior to (and to avoid) repossession. This way you don’t have to pay repossession fees.

Your lender is required by law to send you a post-sale notice that lists all the costs of the repossession and sale.  Don't hesitate to ask for the letter if you don't receive it within a week of the sale of your car. Review the costs closely and ask for receipts to ensure there are no mistakes. This is a good practice in general, but there’s also a chance there could be money left over after all expenses and the balance has been paid. If there is, it may be owed to you as a refund.

If the sale of your car doesn’t cover all the costs on the list, then you’ll be left with a deficiency balance. This is likely to happen if you were already upside-down on your car loan.

The lender has the option to sue you for this balance if they choose. You can contact them to negotiate a settlement before they file a lawsuit. If they get a court judgment for the deficiency, the lender will have access to serious collection techniques like wage garnishment. This is why it’s worth trying to negotiate a settlement or payment plan to avoid a lawsuit.

Keep any documents you receive in connection with the repo in a safe place. You may even want to keep the envelopes if they’re postmarked. This is because the timely, detailed notices the lender must send are an important part of your legal rights. If the lender messes these up, you could bring a lawsuit against them in court. It could cost them the deficiency or even put them in a position to pay you damages. 

Can I Get My Car Back After a Repossession in New Jersey? 

Once the repo agent takes your car, you should receive a Notice of Resale Date letter, also known as a presale notice. This notice gives you the opportunity to redeem your car by reinstating your contract. Reinstating your contract kind of acts like a time machine where you go back to before your default to when you were making timely payments on your loan and had your car. 

Reinstating your car often means paying back the late/missing payments plus repo fees within a certain timeframe. The timeline to reinstate your contract and information on how to do it should be included in your letter. This can be as short as 15 days. Your loan agreement may only allow for one reinstatement over the life of your loan. If your loan agreement has an acceleration clause, your lender could demand that you pay the entire remaining balance on the loan.

Where Can I Find More Information About Repossession Laws in New Jersey? 

• You can contact the NJ Division of Consumer Affairs – Office of Consumer Protection if you need to file a complaint against a lender or repo company. They also have a Guide to Auto Leasing if you have questions about leasing and auto repossessions.

• Legal Services of New Jersey provides free legal assistance for civil matters to low-income individuals.

• Some auto lenders are offering relief during COVID-19, but you have to contact them.

• The Federal Trade Commission has useful information about vehicle repossessions.