Secured debt enables many people to purchase big-ticket items they couldn’t pay for outright, such as home, cars, and recreational vehicles. However, it’s important to understand exactly what it means that your debt is “secured,” and what can happen if you default on your loan. The short answer is that the creditor can repossess, or take back, the property. Nevada repo laws can be complicated.
Repossession differs from most other types of collection action in that “self-help” is allowed. Your credit card company can’t just seize your bank account without a court order, and a medical debt collector can’t just stop by your house and take your car to settle the debt. But, in most cases, a secured creditor can repossess the property that serves as collateral for the loan without filing a lawsuit against you—in fact, without any notice at all.
Understanding Nevada repossession law can help protect your property.
When Can a Creditor Repossess Property in Nevada?
Many automobile purchase contracts provide that the creditor can repossess the vehicle if the payment is even one day late. However, Nevada law protects against instant repossession. In the state of Nevada, a motor vehicle purchase loan isn’t considered in default until the account is 30-days past due, and the creditor can’t repossess before that point. Some contracts still include the one-day provision, and some creditors will attempt to enforce that provision and repossess when payment is just a few days past due, so knowing your rights under Nevada law is critical.
Are There Limits on Who Can Repossess and How?
In the state of Nevada, repossession may be performed only by an employee of a licensed agent, and the law imposes certain additional restrictions. For example, the employee must be at least 18 years of age, and must not have a criminal record. The one exception is an employee repossessing property on behalf of his or her bona fide employer, if the employee works exclusively for that employer.
Acceptable methods of repossession are not specifically spelled out under Nevada law. Rather, the applicable statute provides that the secured creditor may take possession of the property through judicial process, or without judicial process so long as the repossession proceeds “without breach of the peace.” It is important to note that this restriction cannot be waived. That is, a contract provision excusing the creditor or repossession agent from the obligation to avoid breaching the peace is not enforceable.
Some examples of actions by repossession agents that may constitute a breach of the peace include forcibly removing or attempting to remove you from your vehicle, behaving dangerously in traffic in an attempt to force you to pull over, or breaking into your locked garage to seize your vehicle. Of course, many other behaviors may constitute a breach of the peace. If you believe that a repossession agent may have crossed this legal line, you should consult with an attorney experienced in matters concerning secured transactions.
A debtor who has been subjected to a breach of the peace in the repossession process may be entitled to damages based on that violation. But, Nevada law goes even further to protect victims of wrongful repossession.
Wrongful Repossession in Nevada
NRS Section 598.092 makes it a deceptive trade practice to repossess a motor vehicle before the purchaser is legally in default. While a consumer whose vehicle was repossessed prematurely would generally have had a breach of contract claim against the creditor even before passage of the wrongful repossession law, the new statute gives consumers much greater power to pursue compensation for violations. That’s because a breach of contract claim typically would not allow the purchaser to pursue payment of his or her attorney fees.
Since the dollar value associated with most damages for premature repossession is small, many consumers can’t afford to pursue legal action for breach of contract. However, the deceptive trade practices statute shifts attorney fees to the creditor who violated the law, making it possible for consumers to pursue compensation that was previously out of reach.
Some motor vehicle financiers include a contractual provision that allows them to remotely disable the vehicle if the account goes into default. This method is particularly popular among “buy here, pay here” automobile dealers.
How can I avoid repossession in Nevada?
Because Nevada law clearly spells out the point at which property can be repossessed, a legally-executed repossession should never come as a surprise. Thus, a debtor who knows repossession is looming has the opportunity to explore options for avoiding repossession. Some possibilities include:
- Selling the property for enough to pay off the loan (and perhaps have some left over)
- Negotiating with the secured creditor to extend time to pay
- Refinancing the loan, either through the secured creditor or another lender
- Negotiate a surrender of the collateral in full settlement of your debt
- Find out whether bankruptcy might help protect your property
Redeeming Property after Repossession
In Nevada, repossession isn’t necessarily the end of the road for the debtor. Rather, the debtor is entitled to notice and an opportunity to redeem before the property can be disposed of.
If the debtor opts not to or is unable to redeem the property within the time afforded, the secured creditor has great flexibility to dispose of the property through public or private proceedings, as long as the disposal is “commercially reasonable.”
In this process, the secured creditor is entitled to receive full payment of the loan. If the repossession and sale net the creditor more than it is owed, the debtor may be entitled to the excess funds. On the other hand, if the secured creditor is not fully compensated by the sale, the debtor may be responsible for the difference between the amount the creditor recovered and the amount owed.
Bankruptcy and Repossession
Bankruptcy may benefit a debtor facing repossession or who has had property repossessed in several different ways. Some of the possible advantages include:
- The automatic stay that is granted immediately upon the filing of most consumer bankruptcy cases can halt repossession temporarily;
- Surrender of secured property in a Chapter 7 bankruptcy case can protect the debtor from a deficiency judgment.
- A Chapter 13 bankruptcy plan not only allows the debtor to catch up the past due balance over time, but in some circumstances allows for a reduction in the outstanding balance and the interest rate on the loan; and
- If the property has already been repossessed, a Chapter 7 filing can eliminate the deficiency judgment.
If you’re facing repossession or your property has just been repossessed, the time to act is limited. So, it is in your best interest to schedule a free consultation with one of our experienced bankruptcy attorneys as soon as possible. Just fill out the contact form on our website or call 702-903-1254 to learn more about your rights and options.