5 things you need to know about repossession laws in Illinois
Facing the threat of repossession can be a stressful experience, especially when you're not fully aware of your rights and the laws surrounding the process. Here in Illinois, we've observed an uptick in the number of repossessions, corresponding with the escalating delinquency rates. As a bankruptcy attorney at DebtStoppers, I aim to empower individuals with the necessary knowledge about Illinois' repossession laws to help them navigate their financial challenges.
Does repossession often happen in Illinois?
Yes, it does. In fact, Chicago, Illinois, has one of the highest subprime lending markets in the country, which unfortunately means that the city also experiences a high rate of repossessions. The delinquency rates have been rising rapidly, and at DebtStoppers, we've been dealing with the highest number of repossessions since the onset of the pandemic.
Nationally, the delinquency rates on subprime loans have more than doubled, from 2.6% in 2021 to over 5.3%. It's a concerning statistic that underscores the increasing financial distress of many borrowers. Analysts predict that repossessions will continue to rise in 2023, highlighting the urgency for individuals to be well-versed in repossession laws and their rights.
5 important things about repossession in Illinois
1. A vehicle can be repossessed after 1 missed payment
Believe it or not, in Illinois, a vehicle can be repossessed after just one missed payment. Lenders are allowed to seize your car as soon as you default on the loan terms, which generally means when you fail to make a payment on time.
2. You might not be notified
While it may seem unfair, Illinois law does not require lenders to provide notice before repossessing your vehicle. This can lead to unexpected and sudden loss of transportation, a situation that can severely impact your life.
3. A breach of the peace is unlawful
Despite the lack of notification requirements, repossession agents cannot breach the peace while repossessing a vehicle. This means that they cannot use physical force or threats, or trespass on your property to seize your car. If you object firmly when the repo man shows up, or if your car is in a locked garage or behind a locked gate, the repossession is considered unlawful. That said, it's important to note that repossession agents frequently will repossess a vehicle from the debtor’s place of work.
4. Your rights to reinstate the loan and recover the car are limited outside of bankruptcy
After a repossession, your options to get the car back vary based on how much of the loan you've already paid. If you’ve paid at least 30% of your loan at the time of repossession, you’ll receive a notice of redemption. This means that if you can cover the missed payments and pay the cost of repossession within 21 days, you can recover the car.
On the other hand, if you’ve paid less than 30% of the loan, your only option to recover the car is to pay the loan in full, along with the repo fees. But remember, you're only allowed to redeem a car in this way once during the lifetime of the loan.
5. Court hearing is not mandatory
It's worth noting that a court hearing is not a mandatory part of the repossession process in Illinois. A lender can repossess your car without first having to sue you or get a court order.
6. Resale and deficiencies
After repossession, creditors usually attempt to sell the vehicle in order to recover the outstanding loan amount. However, if the resale amount doesn't cover the full debt, the creditor can pursue the debtor for the remaining balance, known as the deficiency. This could mean you end up being sued for the difference between the resale price and your remaining loan balance, adding to your financial burden.
How can you stop repossession in Illinois?
If you find yourself behind on car payments, it's crucial to consult a bankruptcy attorney as soon as possible. Despite the unsettling scenario, there are legal avenues you can explore to stop repossession in Illinois and regain control over your financial situation.
For example, if you want to retain ownership of the car but the payments have become unmanageable, filing a Chapter 13 bankruptcy could be a viable solution. Chapter 13 bankruptcy allows you to restructure the loan terms, which can include reducing the interest rate and extending the payment period. This could make your payments more affordable and halt the repossession process.
Furthermore, if you've had the car for more than 2.5 years, you might qualify for a cramdown. This provision enables you to reduce the loan amount to match the current value of the car, potentially saving you a substantial amount of money.
In conclusion, while the prospect of repossession can be daunting, understanding the laws and your rights can empower you to take control of the situation. If you're facing such a challenge, don't hesitate to reach out to a bankruptcy attorney who can guide you through the legalities and help you explore the best options for your circumstances.
