Louisiana Repo Laws: A Comprehensive Overview

Louisiana Repossession Basics

The term "repossession" denotes "a taking back" of property. In the case of a Louisiana repossession, it means the act of taking back collateral by a secured creditor after default by a secured debtor. Simply stated, default means nonpayment or other violation of loan terms. The secured creditor is entitled to a forced or voluntary custodian action to recover the collateral after default.
Louisiana law frequently facilitates and regulates the manner that collateral may be recovered. The secured creditor may be the lender or the lender’s designee. The lender or his or her agent may choose the manner of recovery that is most expeditious and least costly.
Louisiana law offers a clear explanation of the steps that need to be taken in the repossession process, beginning with the statutory "default." Default must be explicitly stated in the loan documents. Default may be expressed in the written agreement that refers to it in either express or implied terms. The Louisiana Civil Code Article 2480 explains a "default" succinctly.
The owner of the collateral must be identified by the secured creditor , followed by the commencement of the action to recover the collateral. A breach of the security agreement or executory agreement needs to occur for the action to be initiated. The secured creditor needs to determine if he is allowed to repossess without judicial sale or by judicial sale. Louisiana Civil Code Article 2971 defines the rights of the secured creditor to repossession.
Louisiana law allows the secured creditor to retrieve or make repossession of any movable property that was pledged as collateral. If the secured creditor is the lender, he will get advice about the method that will need to be chosen for the type of loan or collateral involved. The lender or their chosen agent is expressly permitted by Louisiana law to take possession of the specific collateral without significantly harming the collateral.
La. Code Civ. Proc. Ann. art. 1250(A). Care should be taken not to damage collateral during repossession because the secured creditor may be liable for consequential damages if the lender does not exercise proper care. To prevent damages, it may be worth the while of the lender to hire an agent with experience in the area of the collateral.

Repossession Requirements Under Louisiana Law

The statutory provision in Louisiana on a secured creditor’s right to repossess is La. R.S. 6:313. In relevant part, it states "If a debtor is in default of any obligation secured by a collateral mortgage or deed of trust, the mortgagee or trustee, after sending notice by mail to the debtor, in care of any one of the debtors, shall have a right to take possession of the . . . collateral immovable or movable, without a court order, and to do any acts necessary to preserve it or its value." (Emphasis added.) Louisiana case law indicates that this provision is essentially self-executing. A secured party is generally authorized to assert its right of repossession without the necessity of a court order or pre-repo assignment. A secured party can merely send the notice and repossess its collateral. Exceptions to Self-Executing Rule Notwithstanding the self-executing nature of La. R.S. 6:313, there are limited exceptions. These exceptions are discussed below:

Your Rights in a Repossession

If a creditor wants to enforce a non-judicial (out of court) security interest or lien in Louisiana, it can do so without going to court by repossessing the property or appointing an individual to do so. A repossession must be peaceful as the debtor has the right to possession until the creditor actually takes possession. The creditor may not commit any "breach of the peace," and cannot enter the debtor’s premises or change locks unless given express permission. To reclaim the property without confronting the debtor, the creditor often employs a repossession agency. Repossession agents must frequently be licensed as private investigators and are prohibited from committing criminal trespass or interfering with family members or pets. There are some legal limits on how repossession must occur, and the debtor also has certain rights during repossession.
The Louisiana Consumer Credit Law (LCCL) expressly prohibits creditors from using any official-looking forms (like a summons or court document) to pressure or harass the debtor into paying a debt, but there are other legal protections as well. Repossession rights of debtors include:

• The right to be in possession of the property until the creditor has the right to take possession, which is allowed only after the debtor "defaults." LCCL § 9:3507(8)(d).
• The right to have notice of the creditor’s intentions, usually by mail.
• The right to receive, upon the debtor’s request, a completed statement of the amount necessary to pay off the debt.
• The right to sue within one year from the date of the unlawful acts for damages, costs, attorney fees, and return of all property.
• The right to be paid reasonable rental value of property taken with notice to the debtor, or return of paid rents until notice can be given.
• The right to demand an immediate accounting for any property taken.
• The right to the immediate return of goods upon written demand if payment is made within 10 days.
• The right to an immediate refund of any money paid for "covenants" after 10 days from mailing of payment notice.

Illegal Practices in Repossession

Louisiana law also prohibits a number of actions that a secured creditor and its repossession agent may not take while repossessing collateral. The breaching of the peace is perhaps the most prominent of these. A secured creditor may not take possession of collateral by use or threat of force. This is particularly true if the property substantially increases in value, as the commander of the 2nd Brigade Combat Team in Iraq, LTC Bob Balldinger, recently learned after utilizing military assets to evict a borrower from his home. The threat of force is not limited to actual physical violence. A simple suggestion that a creditor will take some harmful action that will result in economic loss is sufficient to breach the peace. The method of repossession should never suggest that the secured creditor will cause any additional financial harm to the debtor. In addition, a secured creditor may not enter any premises locked to the public to take possession of collateral. A creditor may enter into any unlocked portion of a residence or into any unlocked vehicle that is within the residence. Abrasive methods of repossession cannot be used to gain entry – e.g., forcing a window or breaking down a door. However, if a debtor uses chains or some other locking device to deliberately lock out a creditor trying to repossess the collateral, the debtor risks losing his or her right to possess the collateral and suffering a waiver of his or her exemptions.

The Sheriff’s Involvement in Repossession

In Louisiana, a repossession is only enforceable by a sheriff deputy. Therefore, lenders must ask for the assistance of a sheriff immediately after the repossession occurs. The lender will be charged with a fee by the sheriff to assist. For example, one local sheriff has a flat fee of $20.00 on all trailer repossessions. More than likely, that fee goes into the pockets of the person actually repossessing the property, since most counties will then post the property at their law enforcement center or other locations in the parish with or without an auction or sale.
L.A. R.S. 6:337 provides an option for a lender to get the sheriff’s assistance if there has been no consent, but a repossession is still necessary. L.A. R.S. 6:337 provides: A creditor who has made a loan or sale of merchandise on credit and takes possession of the collateral securing the loan or sale under a court order or on a lessor’s lien where no money is owing on the contract when a debtor has breached, may make a written request to the sheriff for personnel assistance in taking possession of the property. Upon verification of the genuineness of the signature and the existence of a breach , the sheriff shall appoint a constable, not less than four jurors, and any others as necessary to protect the creditor’s interest, to assist in taking possession of the collateral and returning it to the creditor. A fee of two hundred dollars, payable to the officer having power to appoint the constable and jurors, shall be paid to the sheriff before the sheriff’s summons is issued. No damages, costs, fees, or attorney fees shall be allowed to any party not rendered necessary by an appeal of the judgment.
Basically, the line of credit or sales agreement must be called in and the debtor/debtors must generally refuse to return the property or hand over the property. Then, the lender goes to the sheriff’s office and requests assistance. The lender must pay a fee of $200.00 and the sheriff will commission a constable and four jurors from the local jury pool to accompany the sheriff back to the repossession site. The lender may always request that a deputy also travel back with them. However, since this is private property, it is often treated as a private matter by law enforcement officers. Of course, the price of the repossessor’s fees also needs to be established and agreed upon in advance.

Challenging a Repossession

Unless you have the funds readily available to purchase a car in full, or are working with a bank (that will hold the title till you pay it off), you likely will not own your car free and clear. What happens if you cannot make your payments? The lender can repossess your car—usually without warning. This often comes as a surprise to the consumer, and leads to feelings of defeat, anxiety, and hopelessness. But there is something you can do to fight the repossession. The process begins with a demand for voluntary repossession—a letter written by the lender authorizing the borrower to voluntarily surrender the vehicle in lieu of the repossession process. The lender does not have to send you the demand for voluntary repossession, but a manager or vice president must sign it. After you receive the request, you have two options: Given that the lender usually schedules the voluntary repossession within a matter of days, most people fight the repossession. If you do, you have a few different courses of action. Several options are available to consumers based on the provisions of the vehicle loan and in accordance with law: You may be able to avoid repossession altogether by paying the delinquent balance (or attempting to) before the time of repossession. If this occurs, it is further reason for you to receive your property back should repossession take place. An additional alternative, if repayment of the arrearage is not a possibility, is a Chapter 13 bankruptcy. If the lender conducts a repossession without notice or fails to give the consumer the opportunity to cure the default, repossession may be contested on that basis. The most common method of contesting a repossession is by filing a lawsuit claiming the repossession was "commercially unreasonable". Section 9 of the UCC defines commercially unreasonable as: a disposition of collateral is not commercially reasonable if (a) the disposition is made by a person whose relationship to the debtor and the amount of the obligation is such as to create a significant chance that the disposition will not be effected in a commercially reasonable manner; or (b) the disposition occurs after a significant interval of time following a default without notification of the disposition being given to the debtor. Under Louisiana§ 5-9-627, if the disposition of collateral is made by either sale of the collateral or its lease, the debtor may recover any actual damages caused by a failure to conduct the disposition or any damages, including recovery of any surplus, provided the creditor proves that the deemed value of the collateral was not less than its fair market value. Louisiana law provides that the right to redeem is available to anyone with a lien, "which comes subsequent to the security interest of a secured party." In some circumstances, redemption may be the best option to prevent repossession. This is applicable even when the loan on the vehicle is bigger than its current value. In the early stages of a repossession, the debtor may hope and work toward being able to bring the account current if given a little more time. Having some time to work towards a solution may even help the debtor determine whether filing a lawsuit or bankruptcy is a better option in the long run. When faced with a repo by a creditor you thought you could trust, and who ultimately put you on such precarious ground, sometimes you need to fight back!

After Your Possessions Are Repossessed, What Then?

After the repossession process is completed, the next step for the secured lender is to dispose of the secured property. This may be done via a public or private sale (those terms are specific and have meanings under Louisiana law). The secured lender may buy the property itself, and any unsecured deficiency after the sale remains that lender’s. This means, if the secured property sells for less than the balance due on the loan, the lender has the right to collect the deficiency from the borrower in an additional suit. This holds true for all commercial security agreements and for all consumer loans except for autos, except under certain very limited conditions.
Any person who is in possession of the personal property (by repo or otherwise) must return it to the secured lender upon demand. If that person refuses, he may be liable for conversion and theft, monetary damages, repossession expenses, attorney fees, plus a possible Louisiana recovery under the Louisiana Unfair Trade Practices Act.
The borrower has a right to surplus from the public or private sale (those terms are specific and have meanings under Louisiana law). If the secured lender disposes of the repossessed property for more than the amount owed on the loan, that surplus belongs to the borrower.
If the secured property sells for a lesser amount than the debt due, the borrower will be liable for the deficit. Using the above example, say the truck sold for $8,000 at the public sale auction. The borrower, for example, is liable for the $15,000 difference. Auto loans, again, are an exception to this rule. (The general rule is the opposite.) But auto lenders cannot collect the deficiency after repossession unless there is a chance that the vehicle’s title may be damaged or sold unlawfully. Even under those circumstances, the lender has to go to a judge and get the court to authorize the lender to sell the truck on the open market, and then sue the borrower for the deficit.

Consulting a Lawyer for Repossession Matters

In some instances, the simplest solution to problems with repossession is to file a lawsuit against the repossessor and the creditor. The lawsuit could potentially spare you any potential negative disclosure in the public record by simply obtaining an agreed interlocutory or consent judgment in your favor on the Front of the lawsuit. As always, you will want to consult with a Louisiana consumer attorney to determine if litigation is in your best interest. However, I can tell you that at a minimum, it may be possible for you to get the repossessor to return the vehicle as long as you are making your payments.
An important point to remember in choosing a lawyer is that you should not hire an attorney who has a conflict of interest or who has interests adverse to your own . A potential conflict of interest or adverse interest results from acting on behalf of more than one party in the same matter. For example, a repossession lawyer who handles work for many banks and creditors on a regular basis would be at a disadvantage when representing a consumer against a bank.
Hiring a specialist is a difference-maker. In much the same way as you wouldn’t go to the doctor’s office and receive the right medicine for the wrong illness, you want an attorney that focuses on specific types of claims and regularly gets positive results for his or her clients. General practitioners are not equipped with the type of knowledge and experience needed to handle Louisiana consumer law claims.