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In a NutshellWhen you stop making payments on certain debts, creditors can repossess your property without giving you notice. In many states, the lender doesn’t even have to tell you it’s going to repossess. No matter how far behind you are on your payments, you have rights. This article will explain the repossession process, how it applies to different property, post-repossession notices, and how to get your property back after repossession.
If you’ve experienced a job loss, reduction in work hours, or other financial problems, it can be hard to pay your car note or other debts secured by your personal property. When you stop making payments on certain debts, creditors can repossess your property without giving you notice. In many states, the lender doesn’t even have to tell you it’s going to repossess.
No matter how far behind you are on your payments, you have rights. This article will explain the repossession process, how it applies to different property, post-repossession notices, and how to get your property back after repossession.
Repossession happens when your lender takes back personal property you used to secure a loan. This property is also called collateral. Lenders are able to repossess this probably because they have a security interest in it, which means they have a legal claim to it. When you miss payments, the lender can repossess the property or pay someone (commonly called the repo man) to get it back to sell.
A security interest is a lien on personal property put up by a borrower to get a loan. A security interest is the lender’s insurance policy. If you don’t pay back your loan as promised, your lender can get the property back and sell it to get back some or all of the money it lent to you.
Every state has a repossession process for cars and other collateral. The process varies by state and depends on the laws and the financing contract for personal property. Your contract will explain the state repossession laws that apply to your situation. Depending on your state, after a lender repossesses your personal property, you may be entitled to a repossession notice. Most people receive a Notice of Intent to Sell Property with important information by mail.
Jewelry, vehicles, boats, artworks, and any other personal property can be repossessed. When real estate is repossessed it’s called a foreclosure.
In many states, lenders don't have to notify borrowers before repossessing their vehicle, and this can happen as soon as the borrower misses one payment. In other states, the lender must send a notice to the borrower prior to repossession. If you fall behind on your car payments, you can look at your purchase contract to see how many payments you can miss before your lender considers you delinquent and can repossess.
State laws differ widely. Some lenders will send notices before starting the repossession process. Generally, there are two kinds of notices lenders send to start the repossession process: an acceleration notice and notice and opportunity to cure. If your state requires the lender to notify you before repossession, make sure to read the notice thoroughly. It will include details about how much you’ll need to pay to get back the car and how much time you have to pay it before your personal property is sold at a private sale or auction.
If you receive an acceleration notice, your lender is telling you to pay the full loan amount. They’ve accelerated your future payments because of the default and the whole loan becomes due at once. If a lender sends you a notice and opportunity to cure, you’ll have the opportunity to pay the past-due amount by a certain deadline to avoid repossession.
Military borrowers have special protections under the Servicemembers Civil Relief Act (SCRA). By law, lenders have to get a court order before they can repossess a servicemember’s vehicle.
Since state laws vary, consider contacting a consumer protection attorney to get more information about your state’s repossession laws and required notices.