Property repossession is where creditors recover property from a debtor who has not made their promised payments. They occur most frequently on loans for automobiles and other high-priced equipment. Property repossessions are beginning to become quite common and last year 17,000 homes were taken; this is the highest amount in the last five years.
Repossessions include people’s homes, as well as cars, boats and other property. There are many causes at to why people are losing their property, including poor health, unemployment and low income. All of these can put great financial stress on an owner. With today’s market, it is not surprising that people are dealing with problems of repossession.
With today’s poor job market, anyone can be affected by property repossessions. An estimated 250 million people in the United States are having difficulties making payments on property loans. This number has been steadily increasing during our current recession.
When a consumer purchases property on credit, the creditor normally has the rights to the property until the entire loan is paid off. The credit has what is called a ‘security’ interest. The limits of the creditor’s rights are decided by the contract and the laws of the state.
Lenders typically only begin the action to repossess property if payments are missed for a couple of months in a row. The best thing for the borrower of the loan to do if they are having financial difficulties is to communicate with the lender and make any type of arrangement possible. If communication is not made in attempt to make arrangements, the lender will send a letter demanding payment before they proceed to repossession. Remember it is more than likely that the lender does not want lots of repossessed properties on its hands and only takes action if it considers it has no other choice, so doin’t avoid communication with the lender. Repossession properties do not sell for significant sums in the current market and the lender may well not recoup their total lending. Communication between you and the lender is therefore quite likely to lead to some form of work out arrangement that will be beneficial to you.
Property can be taken or repossessed at any time of the day and at any location in most states. This can even be done within areas of property without any prior warning. The creditor, at no time, can ‘breach the peace’; meaning contact cannot be made with the debtor and laws cannot be broken. If someone who is repossessing a piece of property does ‘breach the peace’, the debtor can sue and collect fees and compensation for damages done to either him or the property.
After a property has been repossessed by a creditor, the creditor will either keep it or sell it to pay for the debt that is owed. The debtor still has a few rights to the property after the repossession has taken place. These rights may be different and vary from one state to another. Some of these rights include:
- To be notified about the property and what is going to be happening with it.
- To be contacted with the information of when the property is sold.
- To buy back the piece of property before it is sold by paying the balance on the loan plus any fees.
- To demand that the piece of property be sold and not kept by the creditor.
- To be contacted if the property is going to be sold at an auction so he can attend and even participate.
As mentioned earlier with a property repossession, the property is sometimes sold and it still does not cover all the debt that is owed. The creditor may sue the debtor for the balance that remains. This is called a deficiency and many states will allow creditors to sure for this as long as there was no breach in peace and the property was sold in an acceptable way. There are some states that do not allow creditors to sue for any kind of deficiencies. A protection agency for consumers or a local attorney will know what rules apply to which states.