Repossession Laws in Michigan

How Many Payments Can I Miss Without Risking a Repossession in Michigan?

In Michigan, your lender can repossess your car as soon as you’re in default on your loan or lease. The most common reason for default is missing payments, but it can also happen if you don’t keep the required insurance or break other terms of your contract.

Your loan or lease agreement will spell out exactly what counts as a default. In some cases, being even one day late could give the lender the right to start the repossession process. In practice, many lenders wait until you’re further behind, but legally they don’t have to.

Will I Be Notified Before the Repossession? How?

Michigan is a self-help repossession state. That means the lender can repossess your car as soon as you’re in default, without getting a court order.

Your lender doesn’t even have to send you advanced notice. The only warning you might get is a reminder from your loan servicer in a late payment notice that your car can be taken for nonpayment.

How Can I Prevent a Repossession?

If possible, the simplest way to prevent a vehicle repossession is to catch up on your car payments and any outstanding late fees. To find out how much time you’ve got to catch up, you’ll need to review your loan documents or your notice of default.

It’s usually best to call your loan servicer to make a late payment by phone because mailed payments can get delayed and some online payment systems make it hard to pay on past-due accounts.

If you’re temporarily unable to make timely payments, you should call your loan servicer right away to see if there’s anything you can do to avoid default. Depending on the circumstances, your lender may give you a forbearance, which pauses your payments temporarily. Or you may even get a permanent revision of your payment schedule.

What Can Repo Companies in Michigan Do? 

In Michigan, repo agents are allowed to take your car if you’re in default, and they can do it right from your driveway or even from a place like a repair shop.

If you’re there when it happens, you can tell the agent to stop and leave. If they keep going, that may count as a breach of the peace. It’s important not to block them or use force, even if you think the repossession is wrongful—doing so could put you at risk of harm or even criminal charges.

Repo agents are not allowed to breach the peace during a repossession. That means they can’t use threats, violence, or police intervention without a warrant. They also can’t trick you into giving them access to your car, or enter locked or private spaces like a gated area or a closed garage.

Car repossession laws are usually based on each state’s Uniform Commercial Code (UCC), which sets rules for sales and commercial transactions. Because repo companies are considered a type of debt collector, Michigan requires them to hold a valid collection agency license and be bonded.

What About the Personal Property in My Car? 

A lender can’t keep or sell the personal property you left inside your car. You should receive a notice telling you how to retrieve these items.

If you know you’re at risk of repossession, you should remove all of your personal items from your car so you don't have to deal with getting them back after your car is taken. 

What Happens After a Repossession in Michigan?

After your car is repossessed, the lender will usually sell it at either a public auction or a private sale. You should receive notice of when and where the sale will happen.

Michigan law requires lenders to sell repossessed cars in a “commercially reasonable” way. That basically means they have to sell it the same way they’d sell other cars and try to get a fair price. If it’s a public auction, you’re even allowed to show up and bid on your own car.

The money from the sale will first go toward the lender’s repossession costs and fees. Then it will be applied to your loan balance, which could include things like lease termination charges or early payoff penalties if those apply to your contract.

If the sale brings in more than you owe, you may be entitled to get the extra money back.

If the sale doesn’t cover everything you owe — which is common if you owed more on the car than it was worth — you’ll still be responsible for the difference, called a deficiency balance. In Michigan, your lender can sue you to collect this amount.

Do I Still Owe After a Repossession in Michigan? 

After your car is repossessed, the lender will add their costs and any fees from your loan contract to the amount you already owe. The money from the auction will lower this balance, but if the car sells for less than the total owed, you’ll still be responsible for the difference—this is called a deficiency balance.

If you choose to voluntarily return your car before the lender repossesses it, you may be able to reduce the deficiency a bit since you won’t be charged for repossession costs.

Can I Get My Car Back After a Repossession in Michigan?

You can redeem your car and get it back after repossession. The notice you get from the repo company will tell you the deadline to redeem the car.  To do so, you may have to pay off the full loan amount (not just the past-due payments).

You’ll also have to pay any other fees or costs you owe. This could include storage fees, sale preparation costs, attorney fees, and other fees. The pre-sale notice you receive should have a phone number to call to find out the exact amount due and how to redeem your vehicle.

Where Can I Find More Information About Repossession Laws in Michigan? 

• Information on the Seizure of Personal and Real Property to Pay a Debt from Michigan Legal Help.

• Legal Services of Northern Michigan has information on consumer protection laws and provides legal assistance to low-income Michiganders. 

• The State Bar of Michigan has a useful Legal Resource & Referral Center. They also offer low-income individuals legal assistance on repossession cases.

• Lakeshore Legal Aid provides legal assistance on civil matters to low-income individuals, seniors, and domestic violence and sexual assault survivors in Michigan.

• The Federal Trade Commission has information for consumers on vehicle repossessions and how to file complaints against lenders who don’t follow repo laws.