Repossession contracts refer to the contractual right of repossession which may be found in many different kinds of transactional agreements.

What is Repossession?

The contractual right of repossession is a process where a creditor can legally take possession of a specific asset or property if a debtor fails to meet their obligations on a contract. This right of repossession exists in many different sorts of agreements and transactions.

Secured Creditors

“Secured creditors” are creditors who are legally able to repossess assets or property because they have an interest of ownership in the property of the borrower. For example, both home mortgages and car loans are provided by secured creditors.

Delinquency

When an account goes into what is called “delinquency” then a creditor can almost immediately start the repossession process. A creditor may contract with another agency or service to actually repossess the property and sell that property. The proceeds form that sale will then be applied to the balance of the loan plus the cost of attorney’s fees and the cost of the sale. Eventually a bankruptcy may be in order.

Limits on Creditors

Broad rights are granted to creditors in the area of repossession. However, their services or vendors who are conducting the repossession cannot break the law or breach the community peace to collect property to satisfy secured debts. State law governs what things constitute a breach of the peace. In very general terms, a breach of the peace means that someone cannot go onto private property to take property from an enclosed garage or into a locked or fenced area without permission. In other words, they may not breach the peace.

In many states concealing or hiding a vehicle in order to hide it from the legal owner is a crime. So, a debtor cannot hide property just to keep it from being repossessed without repercussions.

If the vehicle, motorcycle or item is located in an unsecured area like a parking lot, street, driveway or any accessible area then the service attempting the repossession can take the item.

Vehicle Repossession Rights

The creditor or lessor has important contractual rights when you lease or finance a vehicle from them. These rights continue right up until the last payment is made or until the leasing obligation is met.

If payments are late or if the loan is defaulted upon, then your lessor or creditor may repossess your vehicle. Some states allow the lessors and creditors to accomplish repossession without going to court or even warning you that it might happen. However, this does not mean that they have carte blanche. Of course, they may repossess the vehicle as long as they do no breach the peace.

In many states, the lessor and creditor are limited in the way in which they can sell a repossessed vehicle to reduce or eliminate the debt. There are repercussions for the creditor or lessor if they violate any of the rules which may include the payment of damages.

Other Repossessions

Any kind of property can be repossessed by a creditor to satisfy a secured debt. Actually, any tangible property that can be sold is eligible for repossession. Things like:

  • Artwork
  • Jewelry
  • Furniture
  • Electronics
  • Real Estate
  • Sports Memorabilia

Repossession of a Home

When someone defaults on a home loan, the home can be repossessed. If the consumer cannot pay their mortgage, the lender can sell the property. The proceeds from the sale will then be used to pay as much of the unpaid loan balance. This is due to the fact that the house is collateral for the mortgage.

Unsecured Debt

An example of unsecured debt is a credit card. The creditor has no interest (legally speaking) in the property. When a consumer doesn’t pay their credit card bills the creditor makes attempts to collect on the debt there are rules that apply. The creditor has to eventually get a legal judgment by the court.

If you need help with a debt or repossession or any other legal need, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5-percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with, or on behalf of companies like Google, Stripe, and Twilio.