Repossession is the act taken by the seller who, because of the debtor’s default in making payments under a specific loan arrangement, is allowed to go ahead and repossess the item or property.
If you default on a loan or discontinue making payments, the creditor who has a right to own the item will mostly likely hire somebody, otherwise known at the “repo man” who will take the steps needed to obtain the property under legal means. This is usually done in agreement with the type of contract signed when the consumer agreed that the seller had the right to repossess the object if the signers are past due on their payments. Generally, the grace period for prime lenders is 30 days. Contracts granting repossession also usually specify additional fines that the consumer will have to pay the seller to cover the seller’s costs of repossession and the deflated value of the object or property. Most lending companies usually don’t want to have to go through the repossession process because it is a hassle.
After the property or item is repossessed, it can be sold commercially in order to pay off the debt the creditor is owed. Any shortage in the money made from the sale can also be collected from the debtor even if he doesn’t have it anymore. However, a lender cannot take possession of the good unless the borrower has defaulted on the loan. Furthermore, a notice must be given detailing the nature of the default.
Repossession is a complicated matter because of varying state laws. In the United States, a consumer can avoid repossession simply by declaring bankruptcy or by presenting his or her financial arrangements to the court in hopes of forgiveness.
Bankruptcy and repossession are negative events and they both directly affect a consumer’s credit report.
Dealing with repossession can be both embarrassing and challenging. The most often misconception about repossession among consumers is that once your property is repossessed, your debt is forgiven. But when you apply for another loan and are denied it is most likely because of a note on your credit report signifying that you defaulted on a loan, the amount of the loan and the existing amount. Though you may think you could start fresh, the legal responsibility for the loan still exists.
In order to avoid repossession, contact your lender and see if they are willing to work with you. Some creditors or sellers may even allow you to skip one or more payments per calendar year, which will then be added onto the end of your loan. Other creditors might even allow you to refinance your loan over a longer period of time, which will lower your monthly payments. You should try to do whatever you can in order to get your financially footing back underneath you. If the situation has gotten so out of hand that you are now facing repossession, contact a lawyer who can provide you with proper legal advice.