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Repossessed Cars: How Do They Work and What Laws Should You Know?

It’s easy to get a car loan these days; however, paying it off is another thing. Once your financial burden becomes so great that paying off your loan is extremely difficult–or even impossible to do–then you’re in danger of having your car repossessed.

There are two main reasons why car repossession happens:

First, many car buyers are tempted by those “low-down-payment” schemes that car dealers give. And while they do have the money to pay for the down payment, they neglect to consider the remaining months that they have to pay for their monthly amortization.

Second, some car buyers lose their jobs, affecting their ability to pay off their monthly payments.

 

How far can creditors and loan holders go, legally?

The balance of power shifts when you can’t pay your car loans. The bank or creditor often calls most of the shots here, and is legally allowed (and not allowed) to do the following:

They can seize your vehicle.

The Philippines, unlike other countries, doesn’t have laws that support “fair debt collection”. This means they have the authority to seize your vehicle as soon as you fail to meet your agreed lease or loan as written in the contract (called a default). They are also allowed to trespass your home, although you can talk to your bank and ask them to be more discreet when taking your vehicle.

Whatever the case, it all depends if you will voluntarily give your car up–or not. In the event of a default, the lender can charge against you either of the following:

  1. Extrajudicial foreclosure under the Chattel Mortgage Law (Act No. 1508) – if you will voluntarily surrender your car.
  2. Judicial Foreclosure of the Chattel Mortgage – if you refuse to give your car up. Initially, the lender or bank can file for a Replevin Case, where the court issues an order and the corresponding Writ of Replevin that allows the  sheriff  to repossess your vehicle under any circumstance. This gives him the power to forcefully remove your vehicle even if it’s inside your enclosed property.

They can sell your vehicle.

Your bank or creditor can sell your car at a public auction once they’ve repossessed your car. Still, you have the right to know what’s going to happen to your vehicle, and even take it back once you pay your loan and other expenses incurred in the process of repossessing it.

They can slap you with a “deficiency” charge.

A “deficiency” is any amount (said in the contract) that you still owe your creditor once your vehicle has been sold. There will be a “deficiency hearing”, and the bank or creditor has the right to use any of your assets (like your home, saved money, or other valuable possessions) to pay off the remaining amount you still owe them.

They cannot use force against you.

The lender or “repo man” cannot use any form of violence or physical force against you while repossessing your vehicle; neither should they insult or use obscene language at you. They are also forbidden to forcefully seize your personal belongings inside the car– only car-related accessories are allowed to be taken away.

 

Process of vehicle repossession

Having your car repossessed undergoes a process. They simply can’t just go to your house and get your vehicle as soon as you skipped your monthly payment. The law states they do the following first:

Phase 1: You get a notice from the bank that your car is about to be repossessed, and they’re giving you 21 days to act on it.

Phase 2: You will get another reminder notice after 14 days. At this point, you can either pay what you owe, return the vehicle, or allow the bank to undertake through the repossession process.

Phase 3: If no payment is received, your bank or creditor will start the process of repossessing your vehicle. It will be sent to the bank during this phase.

Phase 4: You’ll get another notice from your creditor. Still, you’re given the chance to take your car back if you fully pay all your debts or find another person to buy your car.

Final Phase: Once no action is taken either from you or a guarantor, then your car will be sold to a public auction after 21 days.

 

Final Word

Having your car repossessed can be stressful, since you will be pressured to pay off your entire debt. Still, knowing its legal jurisdictions and processes can be valuable, since you will know which options work better for you. Hopefully, your choices will give you the best advantage in the end.

 

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25 Comments

  1. Trixie
    November 10, 2018 at 10:38 am — Reply

    Hi, are these steps applicable as well for car loans with lease agreement? Mine is with Toyota Financial – I received a call from an account handler Thursday afternoon and was given on or before monday to settle however the following morning at 930am there were 2 agents at my house saying that I need to voluntarily surrender the car. The charges from 5k ballooned to 13k in just one day. I was asking for the breakdown in writing but I was advised that I need to surrender the car first before they provide the amount I need to pay before they can release the car again to me.

    • November 14, 2018 at 2:53 pm — Reply

      Hi Trixie,
      As far as I know it’s also applicable for loans with lease agreements. However, it depends on the financial company you’re tied up with.
      Still, when in doubt, call them first and verify their process of repossessing vehicles.

    • March 18, 2019 at 10:50 am — Reply

      hello good morning, just want to know what case shud i file reg. a borrowed vehicle and still never return back to me my property. and ignore me and even block me to her phone. and threaten me isasampal kopa sa mukha mo track mo kaya ko bumili nito. then ignored me again and block me.

  2. Cess
    November 20, 2018 at 11:56 pm — Reply

    hi, my car was repossessed yesterday and there were 6 men who came to my house to get the car. i was delayed with the payment for 2 months. the sheriff said to me that the writ of replevin was not yet filed in the court. as what i have read, the order was dated oct 4 and writ of replevin was oct 5. But they are still collecting my payment last oct 17, they sent me a message thru my messenger that i need to update my payment. I also replied and gave them the date that i can pay on oct 25 (due for 3 months delayed) i paid them the penalty an interests. however, yesterday they have already repossess my car and they want me to pay in full. today, i am begging them to pay the 2 months delayed payment and also for this month, but they still didnt accept my negotiation. i am just wondering, if they have issued or filed a case against me last oct 5 then why they are still collecting a payment or partial payment from me? if i knew they have already filed, i would voluntarily repossessed my car and will not pay oct 25

    • November 21, 2018 at 12:44 pm — Reply

      Hi Cess,
      It would be best to consult a lawyer here because of the date discrepancies. It may–or may not–be valid, but in any case, a legal advice would be the best course you can take for now.

  3. L Wells
    November 26, 2018 at 1:26 pm — Reply

    Dear Cheryl
    Is it possible to interview you on car repossession in the Philippines. Please contact me at info@mdsconsultancy.com
    Many Thanks
    L Wells

  4. Aileen D. Roque
    December 3, 2018 at 4:34 pm — Reply

    Hi, there are 2 men from TFS legal that went to our house and said they will be repossessing our car. They left me a letter and my husband was not at home so they were not able to get the car. My husband called them to ask how much we need to pay but they said that we just have to surrender the car. In most forum i read we have 21 days from the reposession letter to still act on it. I was just wondering if its legal for them to just reposess it wven we expressed our intention to pay. And 3days after their reposession letter we received a staement from Toyotq Financial asking as to pay our balance.

    • December 27, 2018 at 3:28 pm — Reply

      Hi Aileen,
      The two men’s actions can be legal if you and your husband failed to act on the repossession notice / letter that the bank has given you after 21 days. Still, it’s not too late to take your car back. If you’re sill willing to pay, then just go to your creditor and pay up all your pending balance with them ASAP.

  5. Sharon
    December 27, 2018 at 5:22 pm — Reply

    I’m only behind for a month and was told that they were trying to call me but i didn’t answer. I work in a call center so most likely i am asleep during day time. I spoke with one of their reps before and told them to redebit my account every 27th of the month because my due date is every 23rd. 2 men came to our house asking me to pay more than 87k. I went to the bank and made a payment of 34500 pesos which includes the amount due for dec 23. I was told that they will still get my car tom. I told them that I got an e-mail with the amount due and that’s what i paid. The letter they handed me did not indicate the exact amount that i need to pay. The first letter that was sent to me as a notice shows final notice already. I have called TFS customer care number and was told that my account is up to date now but someone from their collection department said that i still need to pay more than 50k. Can they still repossessed my car if my account with them is already showing updated?

    • December 28, 2018 at 11:35 am — Reply

      Hi Sharon,
      I see no reason why your car can be repossessed if your account is updated according to TFS. And they also said you’re going to get your car back, which means everything has been settled already. Still, if I were you, I would go to their collection department office personally to clarify the 50k you still need to pay. That way there won’t be any confusion, whatsoever. Good luck!

    • ana gonzales
      March 1, 2019 at 4:42 am — Reply

      HI good morning, I would just like to ask how did it go? Did those men went back to your house to get your car, even if you are already upto date?

      Thank you in advance.

  6. jane
    January 15, 2019 at 10:05 am — Reply

    Hi , my car was 7 month past due, i try to call the bank and they say that i cant pay the past due balance anymore. they said i need to pay the foreclosure amount so they can withdraw the case against me. they said they already file a case against me last December. What should i do. Thank you

    • khaye
      March 5, 2019 at 2:30 pm — Reply

      hi Jane, I have the same inquiry as you, did you receive any message/answer?
      thank you

      • March 7, 2019 at 4:24 pm — Reply

        Hi Khaye and Jane,
        If they filed a case against you last year, then the repossession process has already started. You can’t stop this process–you only need to follow your bank’s instructions by paying the foreclosure amount to retrieve your vehicles again.

        Still, I would advise both of you to consult a lawyer that specializes in this type of case. He or she might be able to give you options I’m not familiar with. Good luck! 🙂

  7. Anonymous
    April 12, 2019 at 3:05 pm — Reply

    Extremely helpful! Thank you po!

  8. KAE NIEVA
    May 16, 2019 at 6:00 pm — Reply

    Hi,

    I just want to ask, my partner missed 2 months monthly amortization in TFS, does that mean that TFS can repossess the car already?He is in default for 2 months.

    • Janelle
      May 21, 2019 at 8:58 pm — Reply

      Hi Kae! I do have the same problem with you and I’ve been telling them that we can settle the balance before the end of month. They would not quote the total amount unless we surrender the unit. I did not even receive any letter from them besides harassing calls. Thanks!

      • May 22, 2019 at 5:26 pm — Reply

        Hi Janelle,
        If you weren’t given any letters to warn you of your car getting repossessed, then perhaps you can file a complaint to your lender.

  9. Mike
    July 16, 2019 at 2:45 pm — Reply

    Hi.

    I just want to ask, paano kung seven months na lang at bayad na ang kotse mo.. pero sa kasamaang palad hindi mo mabayaran n kasi nawalan ka ng work.. may possibility ba na hatakin pa din nila yung car mo kahit na 7 months na lang at tapos muna yung kotse mo?.. paano mangyayare doon sa mga binayad mo mapupunta lang sa wala? sa pag kakaalam ko bayad ko na ung principal ng kotse at interest na lang ang bninabayadan ko… please advise.

    • July 22, 2019 at 2:06 pm — Reply

      Hi Mike,

      Unfortunately, yes–depende yan sa contract you signed with your creditor.

      Better contact them regarding this and ask if they’re willing to renegotiate the terms–baka pwede pa.

      Good luck!

  10. Gene Torres
    July 20, 2019 at 2:35 am — Reply

    Hi Cherryl,

    I am 2 months delayed with my car payment (with BDO) due to financial issues.

    The notifications I received from them did not satisfy the number of days you mentioned on Phases 1 and 2

    I was contacted by an agent (from collections) last July 17th and asked me if I can make a payment on July 19th for an amount of 35,300 Php (2 months payment including interests). I told the agent that I am unable to come up with the money right away but asked if they can give me until next week. The agent said that the offer is only good until July 19th at 2pm, if I cant make any payment then they will have to confirm if I will surrender the car voluntarily or proceed in filinf a replevin case against me. I agreed to just surrender the car, the agent said that someone will contact me next week.

    I also asked if there is still a chance for me to keep the car (even after surrendering it or after agreeing for it to be surrendered) once I have the money next week, in which the agent said that its not possible for me to get it back.

    Can you help me by giving me some insights on what I can do. I would really appreciate it. Thank you.

    • July 22, 2019 at 1:58 pm — Reply

      Hi Mr. Torres,

      First of all, I think it’s best to directly contact BDO regarding your car payment and ask the factual reasons for your vehicle’s repossession. Agents are often third-parties hired by a bank to help them collect fees, and some–although not all–have their own way of collecting fees from BDO’s clients. And that includes harassing you with reasons that may (or may) not be true–such as your car will get repossessed next week, this month, or whatever.

      And regarding getting your car back..it’s always better to verify this directly with BDO. Don’t rely on the agent. In fact, it’s good take a collection agent’s statements with a grain of salt.

      Once you contact BDO and they indeed verify what the agent has told you when he contacted you, then mention to them that they haven’t met the Phase 1 and Phase 2 requirements needed when repossessing vehicles. If they give you legal reasons to support their decision to prematurely repossess your vehicle, write the terms down, and consult this with a lawyer. They might give you valuable advice on what to do next.

      Good luck!

  11. Mark
    July 24, 2019 at 9:52 pm — Reply

    Hi Cherryl

    Simula nung nakuha ko un car under psbank 2 months ako hndi nagbayad at tumawag ang bank na surrender ko nlng. Humihingi ako ng extension pero hindi n daw pwde. Legal ba ito kht tawag lng ginawa nila. I admit n tlgng sinadya ko hnd mgbyad dhl hnd ko gusto un nakuha kong unit. Dalhin ko nlng daw sa banko un car. Ano b un mga possible na mangyayari skn? My sinabi na ddlhin sa warehouse un unit at my charges na 250/day. Pede ko p ba kunin kun sakali un kotse?salamat

  12. Ariel
    July 31, 2019 at 8:29 am — Reply

    Hi ma’am Good morning!

    What is there legal basis for the 21 days to act in case of notice of repossession?

    Secondly, is it applicable also to any creditors not a bank like Toyota Financial Services?

    Thank you.

  13. Jane
    August 15, 2019 at 12:43 pm — Reply

    Hi. My car loan was 3 months pay overdue last month and an statement was delivered to my house indicating over 50,000 pesos unpaid bills including the penalties. The bank auto loan department staff told me (when I called them) that my car will be reposessed and that amount is wrong as I need to pay around 80000 pesos and she promised to send me the breakdown by email which she did not. We decided to pay the amount on the statement and one month passed and I got no call or text or email from them. Then this month, I paid again my loan which means I’m already updated. Then I got another call again from them saying that my car will be repossessed this month? Can they do it when my account is already updated and when they didn’t send me any prior notice or statement?

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