Tennessee laws on secured transactions govern vehicle repossession laws in Tennessee. A secured transaction occurs where a consumer borrows money from a third-party creditor to finance a large purchase, such as a vehicle. The transaction is secure because the vehicle acts as collateral for the creditor’s loan pursuant to a sales contract. The creditor maintains an interest (or lien) on the vehicle that allows the creditor to repossess the vehicle in the event the consumer breaches the sales contract. The most common breach of the agreement occurs when the consumer stops making timely payments on the loan.
Default
If a consumer stops making timely payments on his car loan, he is in default. Typically, a sales contract for the purchase of a vehicle provides that the creditor can repossess the vehicle if the consumer defaults. Vehicle repossession laws in Tennessee do not require the creditor to go to court and obtain a court order to repossess the vehicle. The creditor can simply send a tow truck to pick up the vehicle so long as the repo man does it without breaching the peace. That means the repo man cannot use force or the threat of force or violate trespassing laws when seizing the vehicle.
Resale
If the creditor repossesses the vehicle, the creditor may resell the item to recover the money it lost because the consumer defaulted on the loan. In fact, if the borrower paid 60 percent or more of the loan’s principal, Tennessee law requires that the creditor resell the vehicle at public or private auction. All aspects of the sale must be commercially reasonable. That means the time, place and manner of sale must be reasonable. In other words, the creditor cannot resell a $50,000 vehicle for $5,000. If the defaulted consumer can repay all monies owed as well as any reasonable expenses incurred by the creditor as a result of the default, the consumer can redeem the vehicle and recover it subject to the terms of the sales contract.
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