Creditors that have entered into a valid security agreement with debtors do have the right to self-help repossession when such a debtor defaults. In this instance, the creditor can bypass the court system and take matters into their own hands to regain possession of their collateral. This rule is encompassed by the Uniform Commercial Code and furthermore adopted by the State of Tennessee in Tenn. Code Ann. § 47-9-609(b)(2). That being said, creditors often do not apply the proper procedures and may unknowingly open up the possibility of being sued as a result of repossessing the collateral subject to the security agreement.
In order to properly repossess collateral that is subject to a security agreement, a creditor cannot “breach the peace.” While it is likely obvious that a breach of the peace would encompass some type of violent act, such as pushing, fighting or some other outrageous encounter between the debtor and creditor (similar to what is seen on television shows), it is actually fairly easy for a breach of the peace to occur. All it takes to be considered a breach of the peace is for the debtor to orally protest or object to the creditor’s repossession of the collateral, physical violence is not necessary. For example, if a creditor went to repossess a debtor’s car and the debtor were to merely say “no,” but the creditor continued to carry out the repossession, the creditor could be found guilty of breaching the peace.
It is important to point out that the duty of creditors to refrain from breaching the peace is a non-delegable duty. In other words, if a creditor were to contract with a third party to have that third party repossess the collateral and that third party were to subsequently act in a way that was considered a breach of the peace, the creditor would still be held liable. Additionally, in some states when the secured creditor is confronted by a debtor’s agent (such as a family member, as opposed to the debtor themselves) who is protesting repossession, yet the creditor still continues to repossess the collateral, they are still breaching the peace. This is true, even though they did not receive any protest or objection from the debtor himself.
Furthermore, creditors often enlist the assistance of law enforcement when trying to repossess their collateral to ensure that the act is carried out as civilly as possible. However, even the assistance of a police officer can be considered a breach of the peace in some states. While most states allow for a police officer to be present and observe the repossession take place, once the police officer is used to help in the act of repossessing a breach of the peace may have occurred. For example, if a police officer were to simply advise a debtor that it is in their best interest to allow repossession to occur or that repossession is inevitable under the circumstances, it is possible a breach of the peace has taken place, because the police officer is now assisting in the repossession as opposed to being present in case anything goes awry.
In conclusion, it is extremely easy to potentially “breach the peace,” even when a creditor is making his or her best effort to exercise their self-help remedy of repossession in the most civil and peaceful manner as possible. For this reason, it is best for creditors to seek legal advice when trying to determine the best avenue to take back the control of their collateral and to avoid suffering potential legal consequences when trying to regain possession of what is rightfully theirs.