This year has started off with quite a few consumers inquiring about what their rights are in terms of vehicle repossession. So I have decided to write this piece and give consumers out there the facts regarding car repossession and all that it entails.

Having a car repossessed has a tremendous impact on anyone’s life, not to mention the shame that people feel when it happens. Dealing with consumers that unfortunately experience this process, I can vouch from a first person perspective it is a sensitive, if not emotional event.

Everything suddenly becomes more difficult, getting the kids back and forth from school, getting to work, what happens about medical emergencies? So understandably, everyone wants to hold on to their vehicle as much as they can.

What happens though if you can’t afford the car instalments anymore? Can the bank immediately rock up and repo your vehicle?

For starters there is a legal process that must first be followed, and you need to understand it in order to protect yourself. You should know your legal rights and what the law dictates in a matter such as this. Time to get smart!

So how do vehicles get repossessed?

There are two legal ways in which a bank, or vehicle finance company, can take possession of your asset.

1. Court Order/ Warrant of Execution

To begin with a court order, which is known as a Warrant of Execution, must be obtained by the bank/finance house. This in turn will be an order from the court informing you to allow the creditor to take back possession of the vehicle.

If there is no court order however, they cannot force you to give your car back, and that is the law!

2. Voluntary surrendering of the vehicle

On the other hand, you may give the vehicle back via voluntary surrender in terms of the National Credit Act. The voluntary surrendering of a vehicle is what most credit providers try to get consumers to do. Why? Because it’s the easiest, quickest and cheapest means for the credit provider to get their vehicle back.

What to do when confronted by a debt collector looking to repo your vehicle

Do not be intimidated when a debt collector “from the bank” hands over a form for you to sign, whilst trying to take possession of your car.

Know that any bank form that you sign, other than a Summons which would be delivered via the Sherriff of the court NOT a debt collector, is likely an agreement stating that you’re voluntarily giving the vehicle back.

Few people know that they are under no obligation to sign such a form, also known as a “Consent to Voluntarily Surrender” letter, and hand the vehicle over.

Unfortunately debt collectors and credit providers often blatantly bully and harass consumers into signing this letter. They threaten large amounts of legal fees and costs that will occur if they don’t; it’s purely a scare tactic to make you give in.

I want to make it blatantly clear that your or under no obligation to sign anything at this stage. Your first port of call is to contact a debt specialist or legal aid that can review the matter and provide you with sound expert advice. Do not be rushed into making a dire legal decision before reviewing your options, such is your legal right!

What to Do When You Can’t Afford Your Car Installments

Voluntary Surrender

If you end up in the situation where you find that you can no longer afford to pay for your vehicle, and not yet in arrears with the vehicle payments, you can choose to make use of Section 127 of the National Credit Act (NCA) and voluntarily surrender your vehicle.

To coordinate this you must first provide written notice to your credit provider stating that you wish to terminate the credit agreement and that you require them to collect the vehicle.

As dictated by the NCA the credit provider must then deliver to you, a letter within 10 working days, indicating the estimated sale value of the vehicle. You may dispute the sale value if you are not pleased with it, you may then proceed by withdrawing your notice to surrender and resume possession of your vehicle once more. This is only “if” you are not behind on your car installments, so the key here is that you pursue this option only if the vehicle is 100% up-to-date with payments.

When it comes to voluntary surrender, the bank is obligated by the Act to sell the vehicle as soon as possible, and for the best price reasonably obtainable at the time. This is an important statement, because if your vehicles resale value is very low at that time, you cannot expect to get a reasonable price.

It is also important to realise that when the vehicle is sold at an auction, you are still held liable to pay any shortfall if the vehicle is sold for less than the outstanding balance owed on the account. Quite literally you could end up paying for a vehicle you don’t even have in your possession anymore.

I have met consumers who have gone this route without fully understanding the process and possible consequences and paid the price dearly.

Do your homework and know what you’re getting yourself into “fully”, before making any big decisions regarding voluntarily surrendering your vehicle.

Some consumers however, may feel that it’s better to pay a smaller premium on a reduced balance amount, even if they don’t have the vehicle anymore, than paying a high premium for an asset they can’t afford.

You need to go into this process with the full knowledge of what you want to get out of it.

Court Order

On the other hand, if you’ve missed several payments and the credit provider wants to sue and obtains a court order, i.e. Warrant of Execution, for the repossession of the vehicle, a Summons must first be served upon you. A court date for appearance will then be set, which will be stated in the Summons, whereby you can go and present your case in court before the residing Magistrate.

This is why it’s important to make sure that your credit provider always has your latest physical address on record. For without it the Summons will still be served, most likely to an old address, but you won’t know about it; and subsequently you will also not know about the court date or be able to appeal your case in court.

This means that a “default judgement” will be granted against you, because you didn’t appear in court which is automatically considered an admission of guilt, and in favour of the credit provider.

If you tried to negotiate with the credit provider for an adjusted repayment plan, the Magistrate might actually understand. There could be some sort of leniency in the matter whereby the Magistrate could possibly suggest a reduced monthly premium over a longer period, to accommodate both parties.

Though, if there is no record of negotiations between both parties, the vehicle very may well be awarded to the creditor. Who will then sell the asset at any cost they deem reasonable to cover their expenses. This means that you may still end up paying the shortfall, if it was sold for less than your outstanding balance.

How Debt Review/Debt Counselling helps to protect your car

There is an alternative solution that could help you keep your vehicle, called Debt Review /Debt Counselling.

Upon application legal documents are sent to your credit providers to inform them that you have applied for Debt Review. At that very moment your vehicle is protected against repossession, provided no Summons has been issued yet…so don’t leave it too late.

One of the benefits, of many, of our debt review program is that we negotiate reduced instalments on your accounts; including your vehicle finance. This means you get to keep your vehicle for a reduced monthly instalment without you having to plead with your creditor to assist you.

While the debt review process is not a payment holiday, you are after all still accountable to settle all of your debt; it does provide breathing space in overextended households and helps you to stay on track, with you critical assets intact.

With over 12 years of specialized experience in the debt & legal field Oyisa United Debt Specialists is committed to assisting South African consumers in financial liberation.

OUDS is uniquely placed to tend to your best interests and see that you are financially secure, which you deserve.