Repossession of a vehicle or other personal property is never something anyone plans for. Unfortunately it does happen. The following is a detailed explanation about what can be repossessed when payments are missed.
Repossession is possible when a creditor has a security interest to secure payment of a debt. The most common occurrence of repossession is of vehicles. Foreclosure of a home is also a common instance of repossession. Not as common is when a creditor repossesses something like a refrigerator or television. If you miss payments, the entity that issued the loan has the right to repossess the collateral securing the payment of the debt. Usually, but not always, if you are two or more payments behind, you are at risk to have the collateral repossessed. See Chapter 7 Basics or Chapter 13 Basics for information on how bankruptcy can stop repossession.
The repossession of a home or property is commonly called foreclosure. In California, a non-judicial foreclosure allows a mortgage company to foreclosure on a home without going to court to obtain permission. The foreclosure process in California starts with the mortgage lender filing a Notice of Default with the county recorders office. See California Non-Judicial Foreclosure Timeline for more information.
If you leased or financed the purchase of a vehicle and are making payments to a bank or the dealer you purchased the vehicle from, you gave them the right to repossess the vehicle if you miss payments. A creditor may also repossess a vehicle if insurance for the vehicle is not maintained. The repossessing party may give you notice that they intend to repossess the vehicle, but they do not have to. The personal items found in the repossessed vehicle cannot be sold. The party that repossesses the vehicle should provide a list of the items found in the vehicle and how you can get them back.
Once the vehicle is repossessed the repossessing party will then try to sell the vehicle to satisfy the loan on the vehicle. The problem is that new vehicles lose their value quickly after purchase. Usually when the vehicle is repossessed it is worth less than what the loan balance is. If this is true, you will be responsible for the difference between what is owed on the loan and what the repossessing party sells the vehicle for. Unfortunately the difference, or deficiency, could be thousands of dollars. This debt will now be an unsecured debt though because there is no collateral to secure payment any longer. Like a credit card or medical debt, the deficiency is dischargeable as an unsecured debt when filing a Chapter 7 bankruptcy or Chapter 13 bankruptcy.
When you obtain an item by making payments in a rent-to-own arrangement the item you purchased is collateral to ensure repayment. If you miss payments on a television, refrigerator or bedroom set the collateral could be repossessed just like a vehicle.
What Cannot be Repossessed
Items that can be repossessed have to be specifically named as collateral in the purchase agreement. Most credit cards and personal loans do not specifically name collateral to secure the extension of credit. So, when making a credit card purchase or purchases with a personal loan, the items purchased cannot generally be repossessed.
For more information about how bankruptcy can stop foreclosure or repossession contact West Coast Bankruptcy Attorneys at San Jose Bankruptcy Lawyer and San Francisco Bankruptcy Lawyer.
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