The Misconception About Repossession. Several popular realty television shows depict creditor attempts to repossess collateral after a consumer defaults in repaying the loan. One example is Tru TV’s “Operation Repo” which stars thug like characters repossessing vehicles through coercion, violence and physical confrontation. These shows leave the public and consumers with the impression that a creditor may legally engage in virtually any type of activity, including the use of force and violence, to repossess its collateral.
The Law. The repossession attempts depicted in these television programs are almost always illegal and would be illegal in virtually every state of the country. The law relating to creditor repossession is governed by Article 9 of the Uniform Commercial Code. A similar version of the law has been enacted in at least 49 of the United States (all states except Louisiana). In Texas, the specific statute is Texas Business & Commerce Code §9.609. This statute provides that a creditor is entitled to use self-help repossession, but may only seize collateral without a court order if it can be accomplished without committing a breach of the peace. In other words, as a general rule, a creditor may repossess personal property (any property other than land) without filing a lawsuit or obtaining a court order authoring the repossession attempt. However, if the creditor chooses self help, the repossession attempt may only be pursued if it can be accomplished without breaching the peace.
“Breach of the Peace” Defined. Article 9 does not define “breach of the peace.” The courts have been required to forge a workable definition. A recent Texas appellate court opinion, Chapa v. Traciers & Associates, 267 S.W.3d 386 (Tex.App.-Houston [14 Dist.] 2008), defined “breach of the peace” by relying on several prior cases decided in other states. For example:
A “breach of the peace” as used in the Uniform Commercial Code, means conduct that incites or is likely to incite immediate public turbulence, or that leads to or is likely to lead to an immediate loss of public order and tranquility.” Johnson v. Grossinger Motorcorp, Inc., 753 N.E.2d 431, 440 (Ill. 2001).
Although actual violence is not required to find “breach of the peace” a disturbance or violence must be reasonably likely, and not merely a remote possibility. Salisbury Livestock Co. v. Colo. Cent. Credit Union, 793 P.2d 470, 474 n. 3 (Wyo.1990).
There is no breach of peace when vehicle is repossessed from a public street while the debtor is inside the house. Ash v. Peoples Bank of Greensboro, 500 So.2d 5, 6-7 (Ala.1986).
In an attempted repossession of a car from a street, parking lot or unenclosed space, if repossession is verbally or otherwise contested at the time of and in the immediate vicinity of an attempted repossession, by the defaulting party or another person in control of the vehicle, the creditor must stop the repossession attempt. Census Fed. Credit Union v. Wann, 403 N.E.2d 348, 351-52 (Ind. Ct. App. 1980).
The Moral of the Story: Don’t always believe what you see on TV, even when it is presented as a reality televison. A creditor attempting to repossess a vehicle is relatively safe in repossessing a vehicle if it is done on a public street when there are no people present or likely to confront the repossession agent and complain about it. However, a creditor may not open or break though a door or fence located on private property in an attempt to repossess property. It is also a breach of the peace for a creditor to continue a repossession attempt once he is confronted by a protesting debtor during the repossession attempt. When confronted during a repossession attempt, the creditor must stop the repossession attempt and leave. Otherwise, the creditor is subject to a lawsuit for wrongful repossession.
Postscript. This article was originally posted in April 2012. Since that time, we have received numerous calls from owners of repossessed vehicles that want to hire a lawyer to help them sue the lender for wrongful repossession. Weber Law Firm limits its practice to bankruptcy law. We do not handle wrongful repossession cases unless they are asserted in connection with a bankruptcy case. Vehicle owners that want to discuss their legal remedies for wrongful repossession, but who are not interested in filing a bankruptcy case to regain possession, should consult with a law firm that files civil ligation cases in their state and local area. Weber Law Firm does not represent consumers in wrongful repossession cases outside of a bankruptcy context.