Alabama Repossession Laws

Any purchase made in Alabama on credit or using collateral may be repossessed by the creditor. Repossession is most frequently seen with cars. Until the creditor receives the final loan payment, the lender holds crucial rights to the vehicle. Every state has specific laws regarding repossession and these laws are constantly changing. The laws in Alabama might differ from laws in some other states.


When Repossessions Can Happen

As soon as a borrower defaults on the loan, the creditor can repossess the property. The lender is not required to provide a grace period or extra time for payments. Repossession can begin as soon as one day after a payment was due. If the borrower knows he will be late on payment, he should contact the creditors immediately to inform them of the issue. To avoid repossession, creditors may work with borrowers to make a revised payment schedule or delay the payment, although they are not legally obligated to do so.

How Repossessions Happen

A creditor can repossess property at any time, as long as it is handled in a peaceful manner. The creditor does not have to officially sue the borrower or take her to court before it occurs, but the borrower has to be notified of the repossession. The creditor cannot lure the borrower into bringing the property to a desired location or use any force or threats of violence. The borrower does have the right to any personal property left within the vehicle. She should approach the creditor immediately to retrieve those items or write a letter listing the items and make arrangements to collect them.

After the Repossession

Once the property is gone, the borrower will receive a notice of his right to redeem the automobile. This simply means that the borrower has the right to get the car back, but only if he satisfies the conditions set forth. Usually the borrower has to pay the entire balance of the loan, not just the sum of late payments. The borrower will also have to pay any expenses associated with the repossession (such as storage and preparation for sale). If the borrower cannot pay off the loan, the creditor normally sells the car. If the car sells for less money than the balance of the loan, the borrower is still responsible for the remaining balance. The creditor will inform you of the deficiency and will sue you for the payment. If the creditor did not follow the law on repossession (breached the peace or failed to sell the car in a reasonable manner), the borrower may have some legal defense against paying the deficiency on the loan. In this case, the borrower should obtain sound legal advice.