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What Are Repossessions?
Repossession is the process by which creditors can reclaim property from debtors (those that owe money) who have not kept up with their payments. Repossession most commonly occur on loans for cars and other expensive equipment.
Repossession of Property
When a car or other equipment is purchased on credit, the creditor typically retains rights in the property until the last payment is made. This is called a "security" interest. The extent of those creditor's rights is determined by the contract you signed with the creditor and your state's laws.
If you "default" on your loan then the creditor can repossess the property. The meaning of "default" depends on your contract with the creditor, but usually it means that you are behind on your payments.
Restrictions on How Property Can Be Repossessed
In most states the property can be seized at any time of day at any location, even on parts of your property, without prior warning. The creditor may not, however, "breach the peace" in seizing the property. Typically, courts have said that "breaching the peace" means confronting the debtor or breaking the law.
If a repossessor does breach the peace you can sue the repossessor and collect a penalty fee as well as compensation for any damages to you or your property.
What Happens after the Property Has Been Repossessed?
The creditor will either keep the repossessed property or sell the property off to pay the remainder of the debt. Even after repossession, the debtor still has some rights in the property. These rights, which vary from state to state, include:
- The right to be notified about what will happen to the property
- The right to demand that the property be sold, even if the creditor wants to keep it
- The right to be notified if the property will be sold at public auction so that the debtor can attend and participate if they want
- The right to be notified of the date the property was sold if sold privately
- The right to buy back, or "redeem" the property before it's sold by paying the unpaid balance plus repossession costs
What if the Creditor Sells the Property for Less than the Debt Owed?
If your creditor sold the property and it still does not cover the debt owed, then the creditor can sue the debtor for the remaining unpaid amount called a "deficiency." Most states allow creditors to sue for deficiencies provided the creditor:
- did not breach the peace in repossessing the property; and
- sold the property in a commonly accepted way (i.e. did not try to sell the property for an unreasonably low price).
Some states forbid creditors from suing for deficiencies. You should check with your consumer protection agency or local attorney to find out which rule your state follows.
Do I Need an Attorney to Help Me with My Repossession Problem?
There are many ways a creditor can make a mistake in repossessing property and be liable for their actions. Whether you are the creditor or debtor, an attorney can help protect your interests. A lawyer will know which laws apply in your state and can spot the mistakes of both parties.
Consult a Lawyer - Present Your Case Now!
Last Modified: 06-14-2011 03:05 PM PDT
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