Repossession is a fear that many people face when they aren’t able to make the required payments to the lender. When you take out a secured loan, such as for a vehicle, the item is considered collateral, so when you default on the loan (miss payments) the lender can take the collateral, known as repossession. Repossessions are generally referred to as “self-help”, which means that the lender can legally take the item used for collateral without getting a court order.
The majority of states allow the entity that is repossessing the item to enter your private property to repossess the item, as long as there isn’t a breach in the peace during the repossession. In other words, the lender cannot threaten or use physical force against you or your property to remove the item. For instance, they cannot break into a locked garage to retrieve the vehicle, or they cannot push you aside to gain access to the item; however, they can use a duplicate key to take the vehicle.
Here is some brief information about what property can and cannot be repossessed.
Items That Can Be Repossessed
Although there are strict rules to control what creditors/lenders can repossess if you default on your loan, there are items that can be taken if you fall behind in payments or if you fail to comply with the terms of the security agreement. For instance, if the lender requires you to have insurance on the item and the insurance lapses, you are in default of the security agreement and the creditor can then repossess the property. Some of the most common items that can be repossessed include:
• Vehicles
This includes automobiles, motorcycles, and recreational vehicles. For the majority of vehicle loans, whether the loan was obtained through your bank, a credit union, or the dealership, the creditor / lender has a legal right to repossess the vehicle if you default on the loan. The creditor also isn’t generally required to provide you with advanced notice before repossessing the vehicle. Once the vehicle has been repossessed, the creditor will sell the vehicle, typically at an auction, to recover the money owed on the loan. If the price it sold for doesn’t cover the full due amount of the loan, you may be responsible for paying the difference, along with the lender’s repossession fees and expenses. If your vehicle could be repossessed in the Greater Boston area, you would be wise to hire an experienced Massachusetts Car Repossession attorney.
• Rent-To-Own Items
Almost any item that you rent with a purchase option, such as appliances, electronics, furniture, and jewelry can be repossessed by the lender if you default on the loan. However, the lender cannot simply enter your home to take the rent-to-own item(s). If the property is outside, such as lawn furniture or a grill, and there is open access to the item, they can enter the property to repossess the item. If the item is indoors, they have to have permission from someone in the household to enter the home, or they must get a court order to take back the item.
• Secured Personal Property
If you take out a loan and use personal property as collateral for the loan and the loan is in default, it can be repossessed. For instance, if you borrow money from a creditor to start a business, and you put your personal vehicle up as collateral, even though you own the vehicle, it can be repossessed if you default on the loan.
Items That Cannot Be Repossessed
Lenders without a security interest in an item cannot just take it without legal approval (judge or court clerk). However, creditors can sue you in court in order to recover the money you owe and if the lender wins the lawsuit, your wages may be garnished, a lien can be placed on the property, or your personal property can be seized and sold. With that being said, things creditors cannot repossess include:
• Property that has not been designated as collateral
• Items that have been purchased on a credit card
• Property that is used as collateral in an unenforceable contract
Can A House Be Repossessed?
When the payments for a mortgage are in default, and you are losing your home, it is often referred to as repossession; however, the lender cannot simply take your home. Instead, there is a legal process known as a foreclosure that takes place. The foreclosure process is a legal and lengthy process that must be followed.
If you fall behind on your payments for a secured loan, it is important to talk with the lender. In many situations, lenders may be able to offer various solutions, such as deferring or reducing principal or interest payments for a short period of time to help you catch up and avoid repossession. It is also recommended that you speak with experienced and compassionate debt-relief attorneys to assist you with possible scenarios that may help prevent repossession or if you are facing repossession, but the contract doesn’t comply with the legal requirements in your state. If you aren’t sure about whether your debt is secured, be sure to carefully review the credit agreement, which will provide detailed information about the loan and default on the loan.
