In year two of my five-year car loan, I missed a payment. The loan was secured. Can the creditor just take my car?
You’ve borrowed money from someone and can’t pay it back. They may now seek to take your property to satisfy the debt. A creditor’s right to take your property (or “repossess” it) depends on the terms of your agreement with them and the property involved. Learn your rights when a creditor wants to take your property.
What you should know
If the creditor has “security”
“I missed a payment on my car loan. The dealership told me I that if I didn’t make the next payment, they would repossess my car. I caught back up with my payments right away, and the dealership agreed to reinstate my loan agreement. I was surprised to learn they could repossess my car so quickly.”
– Riley, Vancouver
When you borrow money, the lender can ask for security. This is a property interest you give them that ensures you’ll pay them back. The property is called collateral. This arrangement is typically put in writing in a security agreement. The debt becomes a secured debt and the creditor a secured creditor. This gives them special rights under the law.
For example, say you want to buy a car. The car dealership lends you the money to do so. But first they have you sign an agreement that gives them a security interest in the car. Now the dealership has certain rights to the car. If you default on an obligation under the security agreement (such as miss a loan payment), they can take the car (also called “seizing” or “repossessing” it) and sell it.
If they intend to sell it, they must use commercially reasonable means to get a reasonable price for it. This doesn’t mean they must advertise in every paper from here to Calgary, but they must use reasonable efforts to get a fair market price.
After the sale, the creditor must pay you any amount left over after they are fully paid.
You have the right to “reinstate” the agreement
The law sets out the procedure to be followed after property you put up as collateral is repossessed.
The secured creditor must give you at least 20 days’ written notice before selling the property. The notice must include the amount required to pay off the debt, as well as the amount in arrears. Arrears are payments that were due but have not yet been paid.
If the collateral was consumer goods (explained above), the notice must spell out that as long as you pay off the arrears on the debt, together with the expenses of repossessing the property, you may reinstate the security agreement.
The creditor must then return the repossessed property. Then you’d go back to making payments under your agreement as if the default hadn’t occurred.
If the creditor doesn’t have security
Under the law in BC, if you default on a debt that is not secured, the creditor can’t just come and take your property. They have to take you to court first.
An unsecured creditor must first bring a legal action against you for the debt. They need to get a court judgment against you that confirms you owe the debt.
If the property is personal property, the unsecured creditor can then ask the court for a second order. This order is called a writ of seizure and sale. It gives the creditor the right to take (or “seize”) your property to pay off the debt. The creditor gives the order to a court bailiff to carry out. The law allows you to protect certain property from seizure. See below for details of this process.
When it comes to real property (land), the creditor can register the judgment against the property without a second order. Once the judgment is registered, the creditor can apply to the court to sell the property to pay the debt.
If a bailiff tries to take your property
Most creditors hire a bailiff to repossess a debtor’s property. Confusingly, there are two types of bailiffs in BC, and the rules for them are different.
Licensed bailiffs act where money is owed under an agreement. The repossession doesn’t involve a court order. These bailiffs must be licensed by Consumer Protection BC. They must follow the debt collection laws.
Court bailiffs are hired to carry out court orders on behalf of a creditor. Court bailiffs are appointed by government. They don’t have to be licensed by Consumer Protection BC (though they often are). The rules that apply are the court order enforcement laws.
Certain property is exempt from seizure
Under the law in BC, when a creditor seeks to repossess your property under a court order, you can protect certain personal property from being repossessed. Exempt property includes:
necessary clothing of the debtor and the debtor's dependants
household furnishings and appliances, up to a value of $4,000
one car, up to a value of $5,000 ($2,000 if the debt is for child support)
tools and other personal property the debtor uses to earn income, up to a value of $10,000
medical and dental aids required by the debtor and the debtor's dependants
the principal residence of a debtor, if their equity in the residence is less than $9,000 ($12,000 if the residence is in the Metro Vancouver or Victoria areas) and the debtor is not a party to a proceeding involving a mortgage
If the value of property exceeds the amount set by the exemption rules, the property can be seized and sold. Secured creditors are paid first. The debtor gets any leftover cash up to the allowable exemption.
The law sets out a procedure to follow if the debtor and the court bailiff disagree about the value of exempt property.
If your property is wrongfully seized
Under the law in BC, a debtor can ask the court to order the property be returned pending the outcome of a legal action. This is called an interim order. For example, say a court bailiff seizes your car on behalf of a creditor. You say you’ve paid the creditor in full. You start a legal action for the return of the car. You can apply to court to have the car returned to you until your claim is resolved.
Work out the problem
Step 1. Pay off the arrears to “reinstate” the agreement
If your property is repossessed by a secured creditor, you have the right to reinstate the security agreement by paying off what you owe — as long as the property is consumer goods. See above under “What you should know” for details.
To reinstate the agreement, you must pay off the arrears on the debt (payments that were due but have not yet been paid), together with the expenses of repossessing the property.
If you do this, the creditor must return the repossessed property. You’d then go back to making payments under your agreement as if the default hadn’t occurred.
Step 2. Negotiate with the creditor
For any type of repossession, you can try negotiating with the creditor. Explain your financial situation. If you’re having trouble making debt payments, propose a new repayment plan. A creditor may agree to:
charge you a lower interest rate
extend the time you have to repay
reduce the amount of your payments
See our guidance on negotiating payment terms.
Step 3. Claim an exemption for personal property
Under the law in BC, when a creditor seeks to repossess your property under a court order, you can protect certain personal items. See above under “What you should know” for details.
You must claim any exemption within two days of the property being seized. The law doesn’t set out a specific procedure to claim the exemption. A good approach is to start by making a list of the property you want to exempt.
File a copy of the list with the court registry where the court order was issued. Personally deliver a copy to the court bailiff.
Step 4. Start a legal action
If you think your property was wrongfully taken, you can start a legal action to have it returned. See “What you should know,” above.
If your claim is for less than $35,000, you can sue in Small Claims Court. It’s faster and less complicated than suing in the British Columbia Supreme Court.
If your claim is for less than $5,000, it will be heard by the Civil Resolution Tribunal. This is an online tribunal that encourages a collaborative approach to resolving disputes.
A lawyer can explain your options and help you decide on the best course of action. If you don’t have a lawyer, there are options for free or low-cost legal help.
