What Are Vehicle Repossession Laws in Texas?

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  Texas has adopted the Uniform Commercial Code in its statutes that govern sales and secured transactions. A secured transaction occurs when a consumer purchases an item, like a vehicle, on credit. The creditor uses the vehicle as collateral for the loan. That means until the purchaser (or borrower) repays the entire loan, the creditor has certain rights to the item, including repossessing the vehicle if the borrower defaults (stops making payments).
  
  

Sales Contract

• The sales contract typically defines the terms of the agreement that the buyer, seller and creditor reach. Usually, the sales contract will define what constitutes a default. The contract could define default as missing one payment, going 90 days without making a payment or any other deviation from making complete payments on time each month. If the borrower goes into default, then the creditor can repossess the vehicle even if the sales contract does not specifically state this fact. A creditor would have to specifically agree in the sales contract that it had no right to repossess the vehicle to waive this right, which is something no creditor would likely agree to.
  
  

Repossession

• If the creditor can repossess the vehicle without "breaching the peace," then it can do so without getting a court order. That is, the creditor can send a tow truck to retake the vehicle from the creditor's home so long as the tow truck driver does not use force or the threat of force. If the creditor cannot repossess the vehicle without breaching the peace, then it must go to court to get a court order.
  
  

Resell

• If the sales contract permits the creditor to obtain a deficiency judgment, in Texas, then the borrower could end up still owing the creditor money even after the repossession. A deficiency judgment is where the creditor goes after the borrower for money lost as result of the repossession. For example, a person purchases a $50,000 vehicle and makes $5,000 worth of payments but goes into default still owing the creditor $45,000. If the creditor resells the vehicle and can get only $35,000 for it at an auction, then the creditor could go after the borrower for the $10,000 difference. On the other hand, Texas law allows the borrower to get the vehicle back before the resale if the borrower can pay off the money owed on the vehicle plus the creditor's reasonable expenses incurred in repossession. This process is referred to as redemption.
  
  

Warning

• Please consult a qualified attorney licensed to practice in Texas to determine how the facts of your situation apply to the law, which is subject to change.