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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 money. Most lenders who provide loans for automobiles and real estate take security interests in the property that is being purchased with the loan money, for example. Then, if the borrower defaults on the loan, the lender can repossess the property and sell it to satisfy at least a part of the loan amount.
While it may seem like a foregone conclusion that a lender can repossess your property that is not always the case even if the lender has a security interest in that property. You have the legal right to raise a valid defense that may delay or stop the property repossession. Some common defenses to repossession include:
  • The Lender Does Not Have the Right to Repossess the Property: you may assert that the lender does not have the right to repossess the property if your loan agreement does not give the lender a security interest in the property or if you have not violated any terms of the loan agreement that would allow the lender to repossess the property. If you maintain the required insurance on the property and have paid all of your payments on time, for example, then the lender may not be able to repossess the property. Similarly, if the loan did not specify a valid security interest in the property then the lender does not have the right to repossess the property.
  • The Lender Did Not Provide the Required Notice Prior to Repossessing the Property: many states require lenders to provide you with written notice before repossessing your property. That notice must inform you of your right to pay the outstanding loan balance and contain all of the disclosures required by state law. California, for example, has nine special disclosures that must be included in a repossession notice. If those disclosures are not present then you may have a defense against the lender’s attempt to repossess your property.
  • The Lender Did Not Provide an Opportunity to Cure Prior to Repossession: most states require that the repossession notice provided by the lender include a date by which you can pay the full amount of the outstanding loan and avoid repossession. If you have not been provided with the opportunity to pay the loan off prior to repossession then you may have a defense against the lender’s attempts to repossess the property.
In addition to these defenses to repossession, you may be able to collect damages if the lender breaches the peace or otherwise violates the law during the repossession process. If this occurs, even if it was a lawful repossession to which you did not have a defense, you may be able to collect damages.
For these reasons, it is important to remember that repossession is not a foregone conclusion. You may have defenses to repossession that will allow you to keep your property, maintain your credit score and avoid the hassles and inconvenience that are inherent in the repossession process.

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