What Is a Repossession Affidavit?
A repossession affidavit is a legal statement filed with a department of motor vehicles when a lender repossesses a car. This document informs government authorities that the car has been repossessed and provides details about the action, and it is kept on file with other documents pertaining to the vehicle. The repossession affidavit also entitles the lender to receive a new certificate of title without the borrower's name on it, allowing the lender to sell the car to cover the cost of the loan.
Lenders typically use the car itself as collateral when making an auto loan. Until the borrower has paid the vehicle off, the lender retains the right to repossess it for non-payment, and the title includes a lien from the lender, meaning that the borrower cannot sell the vehicle without explicit consent from the lender. When borrowers begin to lag on payments, the lender can issue a warning that the car will be repossessed unless the borrower can get current, and if the borrower does not take action, the lender can take the car back.
An agent of the lender, often a freelance representative of a repossession agency, goes to collect the vehicle. This can require tracking the vehicle, if the borrower has attempted to move it to a different location. Once the car has been taken back into the lender's possession, the repossession affidavit is filed. This document informs government authorities that the car has been repossessed, provides identifying details including make, model, color, and vehicle identification number, and notes the balance left on the loan at the time of repossession.
Similar filings can be used for boats and other vehicles when they are repossessed, and lenders can also file an repossession affidavit with a title company when they take over a home for nonpayment of a mortgage loan. This document must be on file to remove the borrower from the title, clearing the title so the object in question can be sold. Buyers should note that buying repossessed property usually comes with an as-is disclaimer, and the title may not be clear at the time of purchase if other liens have been added by creditors.
If property is repossessed in error, the repossession affidavit is one of the documents used to track the source of the error and restore the property to the rightful owner. Erroneous repossession is rare but can happen, and people who have had property taken without legal authority can ask for detailed documentation in the process of resolving the situation.
How To Convert Affidavit of Repossession Into a Title
Since an affidavit of repossession can give you legal ownership of a vehicle, it also gives you the opportunity to regain the title document for it. Fortunately, this is a fairly simple process once you have completed the affidavit.
When you have repossessed the vehicle, you will have a few options of how to proceed. You can either transfer the ownership of the vehicle to yourself or you can sell the vehicle and transfer ownership directly to the buyer.
Creating the new title is simple. You will need to submit the affidavit of repossession, documentation about the lien on the vehicle and the new certificate of title to the department of motor vehicles. In some cases, there will be a filing fee associated with this process. The DMV will then issue the approved title certificate to the new owner.
Keep in mind that the process is a little different for each state. Thus, you should check the process for your DMV before proceeding. When repossessing a vehicle or any other property, it is essential to do everything by the books, otherwise, you could legally be committing theft. Chances are, however, that the process will be as simple as filing the affidavit along with supporting documentation and waiting for the DMV to respond.
It is significantly easier to convert an affidavit of repossession into a title if you have the lien listed on the certificate of title. Depending on the state, you may be able to regain the title even if the lien wasn’t listed on the title. However, this will require additional documentation, fees and effort. Therefore, it is usually a good idea to invest the time upfront to ensure that all your paperwork is filed when lending money for a vehicle (or any other reason for that matter).
Can You File a Repossession Affidavit for an Insurance Claim?
If you are using an affidavit of repossession to repossess a vehicle that has been damaged, you can file a claim with the borrower’s insurance. However, the realities of this process may depend a little on the arrangement with the borrower. It is ideal to have the borrower list you as an authorized party on his or her insurance. Typically, this is a required step in the loan documentation.
The insurance provider will likely need to receive the affidavit of repossession along with the insurance claim. However, if you are listed on the policy, it is within your rights to make a claim. Therefore, you can expect that the process will be fairly simple.
Of course, if the policyholder cancelled the policy after the vehicle was repossessed, this process can be more challenging. It is a good idea to document any damage to the vehicle at the time of repossession. Thus, you will be able to show that it occurred while the policy was still active.
Furthermore, if the policyholder failed to list you on the policy, there may be some difficulty at this stage. Nonetheless, if listing was a required part of the loan agreement, you may be able to work with the insurance provider to submit a claim anyway. Contact the provider as soon as possible to learn about its process for claims after repossession.
When Does a Bank Usually Start a Repossession Affidavit?
A lender can begin the repossession process as soon as the borrower is in default on the loan. This is defined within the loan documents. However, it is typically when a payment is at least 30 days past due. Should the borrower be in default, the repossession process can begin almost immediately, although it may take a little while before the vehicle is physically repossessed.
Some lenders have much more aggressive definitions of being in default. For example, buy here pay here dealerships may consider a loan to be in default as soon as the payment is missed. They also tend to be relatively aggressive about repossession.
More traditional lenders are much less rushed with repossession. In fact, it is not uncommon for a bank to give the borrower two or three months to settle the outstanding balance before repossessing the vehicle. It is much more profitable to allow the borrower a little time to pay than to repossess the vehicle, assuming that the late payment is a one-off occurrence.
If you are concerned about repossession, contact your lender immediately and set up a plan for when you will pay the outstanding balance. If you have been late before or are uncommunicative, the lender may be more aggressive about repossession.
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