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Personal Property Found In Repossessed Vehicle: What To Do?


One of the realities of repossessing motor vehicles after a default by the debtor is that vehicles have usually . . .

One of the realities of repossessing motor vehicles after a default by the debtor is that vehicles have usually not been cleared of personal effects prior to repossession. The proper handling and disposing of personal property found in repossessed units is an important part of being compliant with the requirements of state statutes, regulations, and the terms of the motor vehicle retail installment contract.

The first rule affecting a debtor's personal property is that the creditor does not have a right to the personal property that may be in a vehicle when it is repossessed. Typically, the taking of personal property without a security interest is considered theft or conversion; however, the law recognizes that repossessing collateral such as a motor vehicle may also entail temporarily taking some property that is contained within the collateral, so no penalty is attached to the taking as long as the personal property is immediately returned upon demand.

It is recommended that property that is removed from a vehicle is inventoried and bagged. Also, reasonable security measures should be used to protect the property from damage or theft. Should demand be made for property taken, a creditor must return the property unconditionally and not place any conditions on the return of property because doing so could result in criminal and civil penalties. However, many creditors have found that the reclaiming of personal property is a good time to bring up the possibility of signing a waiver of notice form that includes not only the acknowledgement that personal property has been returned, but also a release from future claims of liability. Just make sure that form is totally voluntary.

Sometimes debtors do not claim personal property and in the past the question of what to do with unclaimed property arose frequently. Fortunately, the Texas Legislature addressed the problem of unclaimed personal property by amending the Texas Finance Code to provide notice of the discovery of personal property and a time limit for the debtor to claim it. Under this procedure, the contract must contain a provision for sending notice to the last known address of the debtor within 15 days of discovery of the property. The notice shall disclose to the buyer:
  1. That the buyer may identify and claim the property at a reasonable time before the end of the 30th day after the day on which the notice was mailed or delivered; and
  2. The location at which and reasonable times at which the debtor may identify and claim property during that period.
If the contract contains the proper authorization and notice is sent, the creditor may dispose of the property if it is still unclaimed after that time period. This guidance seems straight forward, but as often is the case when dealing with people unique situations come up. Take the following examples from our members:
 
Illegal Substances:
“We have found glass pipes, residue of what appears to be illegal. As dealers, we are people readers and try to read people the right way and want to work with our customers, but that sometimes backfires,” said Tommy Martinez, Owner of Drive 512 Auto Ranch in Austin, TX.
 
Aftermarket Tires / Wheels:
Steve Finn of Finn's Discount Auto in El Paso says the most frequent request they receive from customers is regarding aftermarket tires/wheels. “Two or three times a year, customers will come in and say they want the tires they purchased (and that are attached to the vehicle at the time of the repossession) returned to them. The question we ask is, if it's attached to the car, does it stay with the car? We sometimes get the same request for stereo systems.”

Ignition Interlock Devices:
“Here's one that you don't come across very often,” Finn added. “Once we found a breathalyzer in the vehicle. Our initial question was, ‘If having a breathalyzer is state mandated, are their special considerations?' On the one hand, we didn't want to damage the vehicle by removing the device; on the other hand, we did not necessarily want to re-sell the vehicle with the device still installed. In this case, the customer became current with their payments, so we didn't have a need to explore this further, but it was certainly a unique situation that wasn't too clear to us at the time.”
 
 
In part two of this blog, we will discuss how to handle a few of these and other unique situations.
 

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