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In a NutshellRepossession is the process of taking back a car after the owner defaults on their auto loan. Each state has different laws and regulations that dictate every step of the repossession process from start to finish. This page will provide an overview of Minnesota's Repossession Laws and what you should know if you've fallen behind on car payments.
Written by Upsolve Team.
Updated March 22, 2024
When you purchase a car, truck, motorcycle, or ATV with financing, the vehicle itself acts as collateral to secure the loan. This means that, if a borrower fails to make their loan payments on time, the lender can seize the vehicle in repayment for what is owed. This process is commonly called repossession.
State law dictates how and when creditors are permitted to repossess an owner’s vehicle. If you live in the Land of 10,000 Lakes, you’ll want to familiarize yourself with the rights and responsibilities of both borrowers and creditors so you can know what to expect if you ever fall behind on your car loan payment schedule.
In Minnesota, the answer to this question isn’t straightforward. Most of the time, borrowers risk repossession if they are even a single day late on a single monthly payment. Unless the terms of your auto loan agreement explicitly say otherwise, lenders can technically repossess your car if you’re late by even one day on your car payment. That’s because they have a security interest in the car. Most lenders wouldn’t repossess a vehicle due to a single late payment — primarily because the repossession process is costly — but the risk is there just the same.
Under most circumstances, lenders won’t repossess a vehicle until a borrower is so behind on their payments that their account is in default. Default status usually kicks in when a loan payment is 90 days or more past due. But default status can vary based on the terms of an individual’s loan. For example, your auto loan may indicate that your account could be in default if you fail to buy proper insurance for your vehicle.
There are two notable exceptions to these general rules in Minnesota. First, if you file bankruptcy, your vehicle can’t be repossessed until your creditor secures permission from the bankruptcy court. Second, some borrowers aren’t at risk of vehicle repossession until they’ve been served with a Cobb Letter.
Minnesota doesn’t require prior notice, except when a Cobb notice or letter is mandated. Lenders are required to provide a repossession notice to the borrower if that lender has accepted a borrower’s late payment more than once during their loan term without repossessing the vehicle. Logically, if a borrower has had their late payments accepted without a repossession before, they have a reasonable expectation that their vehicle won’t be taken without notice.
This means that if your lender has accepted your late payment at least twice without repossessing your vehicle, they must serve you with notice that they may seize your vehicle if you don’t honor the terms of your contract moving forward. A lender must send a repeat Cobb notice if they accept more late payments after they’ve sent a previous Cobb notice. The Cobb notice must be written and mailed to the borrower to meet legal requirements.
Regardless of whether you’ve received a Cobb letter, if your car has been repossessed already, your lender must provide you with written notice concerning the repossession. In that notice, they must explain how much it’ll cost to redeem your vehicle and how much time you have to redeem it before it’ll be sold at auction or otherwise disposed of.
The only surefire way to prevent repossession is to remain current on your auto loan payments at all times. If you never fall behind in your payment schedule, you’ll never provide your creditor with an opportunity to seize the collateral tied to your loan.
If you’re already behind in your payments but your lender has not yet repossessed your vehicle, you have two options to avoid repossession. First, you can immediately pay off your overdue loan balance in full.
Second, you can speak with your lender to proactively set up a payment plan. Your lender may agree to a temporary deferment or may be willing to let you tack your missed payments onto the end of your loan term. You can also explore refinancing your loan or modifying its original terms with your lender. If they know that you’re catching up on your overdue payments according to specific, agreed-upon terms, they won’t repossess your vehicle as long as you stick to those terms.
If you can’t catch up on your overdue payments and you can’t reliably make your scheduled payments any time soon, you may want to speak with your lender about voluntary repossession. Surrendering your vehicle can help you avoid a hit to your credit score from a repossession. If your loan is already upside down, this may be an especially wise approach.
If you borrowed $7,500 or less to finance your vehicle and you choose voluntary repossession, you won’t be held accountable for the remainder of your balance [ 0 ] .