Repossession Laws in Indiana

If you don’t make your car payments on time, your lender can take your car in place of the missing money. This process is called repossession. The lender can do this because your car serves as collateral for the auto loan, which is a type of secured loan. 

Your rights as an auto owner and the process of vehicle repossession are different depending on what state you live in. Facing auto repossession can be terrifying. But understanding how repossession works in your state and what rights you have can help. This article will explain what to expect and strategies to keep in mind as a car owner in the state of Indiana.

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

The state of Indiana looks to see if you are meeting the requirements of your loan. Monthly payments are the primary requirement in auto loan contracts, but your loan could also include other mandatory conditions like maintaining proper auto insurance. If you’re not meeting these conditions you could be in default on your auto loan contract. This is when repossession can occur. In some cases, it’s after a single payment is a day or more late.

Review your contract to understand what your lender views as defaulting on the loan and whether they offer a grace period. A grace period gives you more time to make up a missed payment.

Will I Be Notified Before the Repossession? How?

Once you’re in default, Indiana repossession agents can take your motor vehicle at any time without giving you notice. They must notify the local sheriff’s office either before or within two hours of the repossession with details of the action. But this notice won’t extend to you. The safest bet is to assume that your car can be taken at any time without warning if you’re loan is in default.

How Can I Prevent a Repossession?

It’s not over until it's over so don’t be shy about exploring your options. Your best, and least disruptive, chance of avoiding a repo is to pick up the phone and call your lender as soon as you know you’re going to have a late or missed payment. Your lender has good reason to make your loan work, even if that means letting you pay late, setting up a new payment plan, or going into temporary forbearance, which pauses your payments temporarily. This is because the lender’s alternative is to lose money on repo and legal fees in the hopes of getting back a fraction of what they lent you. 

Indiana state law says your car is up for repossession as soon as you’re in default. Your loan agreement may list options for “curing your default.” This refers to anything you can do to get back in good standing on your loan agreement like paying back the money you owe. If curing isn’t an option, explore additional strategies such as refinancing, selling your car, or filing for bankruptcy to see if they might be a fit for your situation.

What Can Repo Companies in Indiana Do? 

The Uniform Commercial Code sets out the rules for how a repo can happen and what behavior is unlawful. Your car can be taken or rendered unusable by a repossession company as long as they don’t breach the peace. If a repo company commits a breach of the peace, they essentially haven’t played fair. 

Repo agents can’t damage your private property, use force, threaten you, try to trick you, or enter your home without consent. It’s important to know that your home doesn’t stop at your front door. It includes any area behind a locked gate or in a garage. The repo agency can access all other places without permission to take your car. Repo companies commonly take cars from open driveways, private lots, and even auto repair shops.

You have the right to verbally object to the repossession and the repo agency has to stop if you do. If they don’t, you can call the police and say the repo agency has breached the peace. But (and this is important) the breach of the peace rules don’t only apply to the repo agency. You must abide by them as well. It’s critical that you don’t physically try to stop the repossession. You could get hurt or arrested. 

Also, if you verbally or physically attempt to stop the repo, the repo agency could add additional fees to their bill, which will be passed along to you. For these reasons, it’s best to comply with the repossession or to simply object to it verbally. Seeing the repo agency take your car is horrible, but at the end of the day, they are doing their job. You might even have a sympathetic repo agent, but they still have to take your car. 

Repo companies don’t need a license in Indiana, so there’s no oversight to guarantee that you will get someone who is going to treat you respectfully. Create a safety net for yourself by taking notes and photographing or recording the event. Write down the date, time, repo company, agent information, and contact information for any witnesses. Be prepared to call the police if necessary. Best-case scenario you won’t need this evidence, but it will be invaluable if you do need to file a complaint.  

What About the Personal Property in My Car? 

You can save yourself a lot of hassle by removing all your personal property from your car as soon as you know you might be at risk of a repo. 

If your personal property is still in your repossessed car and the value of your items is $10 or more, the lender has to inventory the items and give you written notice via certified mail of the list plus 30 days to retrieve your property. You must claim these items within 30 days of the notice being mailed. Otherwise, the items will belong to your creditor. Don’t wait, if you know you’re missing eligible items, contact your lender immediately and let them know what you’re missing so the repo agency can’t claim that you abandoned your property. 

What Happens After a Repossession in Indiana? 

The creditor can choose to keep your car unless you’ve paid more than 60% of the loan balance. In that case, the lender is required to sell your car at auction. You will receive a Notice of Sale with details on the location and time of the sale. Most lenders will choose to sell the car at auction for the highest price they can get. To ensure the process is fair, the lender has to make commercially reasonable efforts to sell the car. This can include researching a fair price, making repairs, and listing the sale. The sale price itself, even if it’s lower than fair market value, won’t matter as much as these other factors when it comes to determining if the lender acted in a commercially reasonable way.

Do I Still Owe After a Repossession in Indiana? 

You may think that once your car has been repossessed, you’re off the hook for your loan obligation. Sadly, this isn’t the case.

Once your car is sold, the proceeds are paid out in the following order:

1. Repossession fees (repo services, towing, storage, etc.)

2. Sale fees (car cleaning or repairs, advertising the auction, auction fee, etc.)

3. Your loan balance

You should receive an itemized accounting of how funds were distributed in your post-sale notice. Review the charges carefully, and don’t hesitate to ask for receipts. Any mistakes the lender makes will come at your expense. Lenders’ requirement to give you timely, detailed notices as part of the repo process is a big part of your rights as a borrower.  Keep all documents you receive in a safe place. If your lender doesn’t provide the proper notices with the proper information, you may have a basis for a lawsuit or a defense if your lender sues you for a deficiency judgment. 

If the sale proceeds cover the above costs and beyond, the lender owes you a refund of any remaining money (the surplus). If sale proceeds don’t cover all those costs, you’ll owe what’s known as a deficiency balance. This is often the case for car owners who are upside-down on their car loans. If you owe a deficiency balance, the lender can sue you for it. If the purchase price of your car was $3,600 or less, it’s a good thing you live in Indiana. Indiana code protects you from further action as your creditor has to choose between repossessing your car or going after you for the loan balance. They can’t do both. 

If your car’s purchase price was more than $3,600, you still have to manage your deficiency balance. Try to avoid a legal battle, attorney fees, and a court order by proactively contacting your lender and settling with them directly.  

It’s horrifying that the costs from repossessing and selling your car could take such a big piece out of the sale proceeds since the entire point of taking your car is to try to recoup the costs of your unpaid car loan. That’s why you don’t want to prolong the car repossession process through tricks, like trying to hide your car from the repo man. You might even want to consider a so-called voluntary repossession or voluntary surrender. Doing so allows you to avoid costly repossession fees. 

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

You should receive a Notice of Sale once your car is repossessed that will give you instructions on how to redeem (get back) your car before it’s sold. This often involves paying back all the money you owe plus the expenses of the repo.  

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

• Indiana Legal Services has more information on auto repossessions and how to deal with a repossessed vehicle.

• The American Bar Association has a list of places to find legal advice and assistance across the state of Indiana.

• Indiana State Bar Association has information on accessing free legal advice and representing yourself in legal matters.

• The current cost of a car where the lender has to choose between repossession and deficiency judgment is $3,600, but it changes annually.  

COVID-19 Hardship Information 

Some auto lenders are offering auto loan relief for individuals experiencing financial hardship due to COVID-19, but you have to contact them.