Dear Attorney,
I need help regarding my mother’s unpaid vehicle loan due to her illness. Despite our attempts to contact the lending company and offer to settle the loan through installments, we have received no response. We are worried they might repossess the vehicle. What legal steps can we take to prevent repossession and ensure that the company considers our request to pay in fractions?
Sincerely,
Concerned Family Member
Insights
In the Philippines, non-payment of a vehicle loan can lead to repossession of the vehicle under certain conditions. When a loan is secured by a chattel mortgage, which is common in vehicle financing, failure to pay as agreed may give the creditor the right to repossess the vehicle through extrajudicial or judicial means.
A chattel mortgage allows the lender to take possession of the vehicle if the borrower defaults. Repossession, however, must be carried out in accordance with the law. Under the Chattel Mortgage Law (Act No. 1508), the creditor may take possession of the vehicle if the borrower defaults, but only through a lawful process, which can be extrajudicial (no court intervention) if specified in the mortgage contract. This means the creditor can repossess the vehicle without a court order, provided they follow the correct procedure.
The borrower may prevent repossession by paying the overdue amounts or renegotiating the terms of payment with the creditor. According to Republic Act No. 3765 (the Truth in Lending Act), the lending company is obliged to be transparent about the borrower’s rights and the consequences of non-payment, including the possibility of repossession.
If the lending company is unresponsive, the borrower may file a complaint with the Bangko Sentral ng Pilipinas (BSP) or the Department of Trade and Industry (DTI), which oversee financial institutions, including those offering vehicle loans. The borrower may also consider a request for debt restructuring or enter into a payment agreement that suits their current financial capacity. Additionally, they may invoke equitable relief, where courts can intervene to prevent repossession if the debtor demonstrates good faith in attempting to resolve the debt.
Ultimately, seeking legal assistance from a lawyer is advisable, as they can review the loan agreement, determine the validity of the chattel mortgage, and propose legal remedies that may prevent the repossession of the vehicle.