Repossession and the threat of repossession can cause a significant amount of anxiety and concern for consumers. To help ease some of that anxiety, it may be helpful to understand what repossession is, how it works and what consumers facing the threat of repossession may be able to do about it.
What is repossession?
Repossession refers to a process when a creditor takes possession of property after the consumer has defaulted on a contract usually by missing payments. Repossession typically refers to secured credit agreements which are secured by property the creditor can repossess in the event of default. Examples can include cars or homes in situations of car loans or mortgage loans. Cars, and a number of other items, can be subject to repossession.
What is the repossession process?
After a credit account becomes delinquent, the creditor can begin the repossession process and may do so immediately. The creditor may then repossess the property to sell it to satisfy the balance of the loan, the cost of the sale and any fees. Because repossession is usually a contractual right, the process can begin almost immediately and without court intervention or a court order.
What can consumers do about repossession?
One limit on the creditor’s right of repossession is that they are usually prohibited by state laws from coming onto private property to repossess the property. These are referred to as breach of the peace laws. Consumers, however, are also prohibited from hiding the property subject to repossession from the creditor.
Other consumer protections may apply including if the creditor improperly calculated the debt; there was an error and the consumer was not in default; the creditor failed to provide required notices; the consumer has military service protections; or the consumer has bankruptcy protections. The protections against repossession can be particular to the circumstances of each situation which is why it is essential for consumers to be familiar with the different consumer protections available to them when facing repossession.