How Can a Creditor Repossess Property?
By: LawInfo
Published: 05/2010
Many Americans experience a time when their financial obligations become overwhelming and they are unable to pay all of their outstanding obligations on time. A debtor who defaults on a secured loan may face the threat of property repossession. A creditor can repossess property only if the creditor has a valid security interest in that property and if the creditor follows the proper legal procedures for repossessing the property.
The specific laws regarding property repossession vary from state to state but generally include:
· The Creditor Must Have a Valid Security Interest in the Property: that means that the security interest must have been created in compliance with all state laws. In order to enforce a security interest, the creditor must not only enter a binding loan contract creating the security interest but also file, or record, the security interest with the state in order to retain a priority interest in the secured property.
· You Must be in Default on the Loan or Fail to Pay the Accelerated Loan: your loan document explains when you are in default on the loan and when the creditor may demand that you pay the remainder of the loan. If you have been making your regular payments on time then you are likely not in default on the loan and the creditor probably does not have the right to repossess your property.
· You Must be Given Notice and the Right to Cure: most states require creditors to provide notice to debtors prior to repossessing property. The notice usually contains the legal authority the creditor has to repossess the property. It also provides debtors with a certain amount of time to pay the loan and any outstanding fees or penalties. If the debtor pays his or her obligations within that time then the creditor loses the right to repossess the property. However, if the debtor does not pay his or her obligations by the date contained in the letter then the creditor has the legal right to repossess the property.
· The Creditor May Not Disturb the Peace: a creditor has the right to repossess property, without a court order, but only if it can be done without breaching the peace. That means that the creditor may not force entry to your home, intimidate you, or do anything unlawful to obtain custody of the property. For example, if a creditor is repossessing your car then the creditor may take possession of the car that is parked in a parking lot or your driveway but may not break into a locked garage to get the car. If the car, of other property, is out of reach and the debtor refuses entry then the creditor would need to seek assistance of the court to obtain the property.
If the creditor violates any of your rights then the property repossession may have occurred illegally and you may have the right to compensation. Therefore, it is important to understand how a creditor can legally repossess your property and to protect yourself should you find yourself in a situation where repossession is an option.
Other Banking & Finance Articles
-
The Truth About the Truth in Lending Act
Since 1968, American consumers have been entitled to clear disclosure of credit terms and costs in lending agreements. It was in 1968 that Congress passed the … More -
What happens if my bank fails?
In today’s economy, you might wonder what will happen to your money if your bank fails, or if a federal or state banking regulatory agency closes down your … More -
The Mortgage Forgiveness Debt Relief Act of 2007
In December 2007, the federal government enacted the Mortgage Forgiveness Debt Relief Act. The Act was meant to provide tax relief to taxpayers who had debt … More -
Can I use a loan modification program in order to save my home from foreclosure?
With mortgage foreclosures at an all time high, major banks across the nation have begun offering loan modification programs for people who are in danger of losing … More -
What You Need to Know about 401k Withdrawals
401k plans are common retirement investment tools for United States workers. The plans, named for the section of the IRS code that defines them, allow workers to save … More -
What are Negotiable Instruments?
Have you ever wondered what law applies when you write a check or purchase a certificate of deposit (CD)? Checks and certificates of deposit are types of … More -
Should You Borrow Money From Your 401k?
It can be frustrating and often frightening when due to unemployment, a recession, or other factors, a person’s available cash is not enough to meet his or her … More -
The Federal Reserve Board's New Credit Card Protections for the Consumer
Are the days of unfair credit card practices over? While the credit card companies may mourn their passing, American consumers are seeking fair credit card … More -
Defenses to Repossession
It can be easier to get a lender to agree to loan you money if you provide the lender with a security interest in the property that you are purchasing with the loan … More -
How to Prevent Automatic Withdrawal Scams
Every year many Americans become victims of automatic withdrawal scams. They may be offered a free item only to find that it was not in fact free, they may be … More
