An Overview of Seize Or Sue And Vehicle Loans In BC
What is the Seize Or Sue Law For Vehicle Loans In BC?
If you’re struggling to pay your car loan in BC, understanding Seize or Sue will help you to figure out what you need to do to move forward. Vehicle loans and leases can be a great way to get a new car when you need one, but it isn’t unusual to find people who eventually realise that they can’t keep up with their long term payments.
There are laws, however, under the Personal Property Security Act that can enable car owners to deal with loans that are no longer affordable.
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What is Seize And Sue?
This is a unique set of rules in BC, as not all provinces have rules like this in place. Seize and sue means that in the event you are no longer able to (or you simply stop) paying your vehicle loan, the creditor may take ONE of the following actions against you:
- Seize the vehicle as per the lending term agreements, ending further payment obligations.
- Sue you for the remaining balance and you keep possession of the vehicle.
It is up to the lender to decide how they will proceed and whether they want to seize the vehicle or sue you for the owed amount. If the vehicle is repossessed under the loan agreement’s terms your creditor may not ask you for further payments or ask you for the difference of any shortfall (such as the difference between the loan’s balance and how much they are able to recover).
If the vehicle value is still high in comparison to the loan balance, this will likely be the option that the creditor will take. Should you have paid more than ⅔ of the total amount then the lender will be prohibited from seizing your vehicle unless they are permitted a court order.
When does Seize and Sue Apply?
Seize and Sue is not applicable in all provinces, so it may not apply to your situation. It will apply when:
- You reside in BC;
- Your vehicle is being used primarily for personal, family, or household purposes;
- Your vehicle is registered in BC;
- You have a loan under which the lender holds security in the form of a registered charge against the vehicle.
If the creditor allows you to keep the vehicle and chooses to sue you for the loan’s balance, the creditor will be required to release their registered charge on the vehicle. A creditor who is successfully suing you may proceed with extreme collection actions such as wage garnishments or seizure and sale of your assets with a court bailiff.
More often than not, if a vehicle still has a large amount withstanding, the creditor will seize the vehicle as they will be able to recover a large sum of the money owed. If the value is low, they will likely pursue you for the rest of the money rather than seize the vehicle.
Exemptions To The Rules
There are exemptions to the seize and sue rules in BC. They are:
Seize and Sue will apply only to loans and financing arrangements; they don’t apply to agreements that are true leases. If your leased vehicle is seized, the creditor will be able to demand payment on the shortfall of the vehicle’s lease.
A licensed insolvency trustee will be able to help you decipher financing agreements so that you can determine whether you are entered into a full leasing agreement.
Voluntary Surrender Of A Vehicle
If you sign a voluntary surrender document you may waive your rights to utilize the seize or sue laws and give your creditor a way to collect on payments from you for the balance left on the vehicle. Seeking legal advice before you do this is key, as you need to ensure you take the correct steps for the optimal outcome.
We’ve all felt buyer’s remorse at one time or another, but it can be scary when you experience it after purchasing something as valuable as a car. You won’t generally be able to return a newly purchased vehicle to a dealership, but there may be exceptions. For example:
- There’s a return policy;
- The vehicle doesn’t meet the expected standards for road worthiness;
- There was a material misrepresentation regarding the vehicle;
- You are leasing and have not waived your right to ‘one clear day’ cooling off period.
What Are The Steps For Vehicle Repossession?
Knowing what to expect if you feel you may have your vehicle repossessed will give you peace of mind.
Your vehicle may be repossessed if you have defaulted under a security agreement like a loan or a lease and the secured creditor is attempting to get back the money they are owed. If this happens, a court bailiff may come to take the asset to be sold due to a successful seizure and sale granted to a judgement creditor.
If you default (miss payments) under a security agreement, or even decide to stop making payments because you can no longer afford the vehicle, this is the first step to having your vehicle repossessed. Some people even inform the creditors that they intend to stop making payments as it speeds the process up. The creditor may then give you notice that they plan to take the vehicle (if they are not going to sue you for the debt) and you have 15 days to object.
Bear in mind that keeping the insurance is crucial so that the vehicle is taken care of while still in your possession. If you do not have insurance then you put it at risk of reckless or wilful acts that could damage the vehicle and may disqualify you from the seize or sue rules in BC.
A licensed bailiff will usually collect the property being seized on behalf of the secured creditor. You will need to remove personal items from the vehicle at this stage, even license plates. You won’t be able to cancel the insurance without these and could be responsible for paying insurance premiums when the vehicle is sold on. No later than 20 days before the disposition of the vehicle, the secured creditor will give notice containing details of the seizure and upcoming disposition.
What Will Happen To The Vehicle And Your Credit?
The vehicle may be disposed of in various ways. It may be sold on through public sale or auction, or by lease. A notation can be found on your credit history once the vehicle has been repossessed. It may be there for up to 7 years, along with a balance for a shortfall remaining for a vehicle lease.
Vehicle Loans Or Leases In A Consumer Proposal Or Bankruptcy
If you are having trouble paying your vehicle loan, you may also be struggling to pay other debts, such as credit cards. Making a consumer proposal and presenting it to your creditors could mean consolidating your debts and saving thousands in interest.
A bankruptcy could also reduce your debts, although the two options are very different and should be explored in detail. If you decide to go ahead with a consumer proposal, you may find it much easier to manage your various debts and see that you can afford your vehicle payments after all.
If there is no way you can see you will be able to pay your debts, then bankruptcy might be the only option. Bankruptcy Canada can advise you on the best step to take for your situation.
More About Your Options
The beginning of a consumer proposal or bankruptcy could be a good time to consider whether you would like to keep on paying your vehicle loan/lease. You will usually have a choice on how to manage debts with your secured creditors when you choose to take a step such as bankruptcy or consumer proposal.
A consumer proposal or bankruptcy will not typically impact your agreements with your loan/lease creditor if your accounts are still in good standing and you wish to keep your vehicle.
If you don’t wish to keep your vehicle or continue with the loan/lease, then you can surrender the car to the secured creditor and end your ongoing commitments. Vehicle values depreciate fast, so if you have used your vehicle as collateral on a consolidation loan, your car may now be worth less than what you owe for it. This should factor into whether you decide to keep your vehicle loan.
If there is a shortfall you owe from a lease then this can be written off as part of either solution.
Get In Touch With Bankruptcy Canada
If you’re unsure what to do about your vehicle loan, get in touch with Bankruptcy Canada for advice. Money troubles can be stressful, but the sooner you act, the better. We can help you to arrange the ideal solution for your situation.