Legal Issues In Repossession

There are many different legal issues which individuals that have repossession businesses or individuals that are facing the possibility of having something repossessed need to be aware of. Each state has individual and different repossession laws, so it is important to be aware of what can and cannot happen with regards to repossession.

Basically any type of repossession occurs when someone owes money on a tangible item and the borrower has defaulted on the payment. These types of repossessions can occur because the borrower actually has a form of a secured loan with the item itself being used as collateral. Since this is a form of a loan, the purchaser who is also the borrower, really is not the owner of the item until the loan for the item is paid in full. The lender actually, in legal terms, continues to be the owner until the note is paid off in full. This allows the lender (with right of ownership) to take the property back without having to go through the court to get a judgment against the party with the right of possession.

Usually most companies that offer equipment, vehicles and other large items don't actually do the repossession, rather they hire a specialized company to go out and collect the property. Even in states where repossessions can be done through these companies, there are still legal precedents that limit or structure the ways and means that the company can use to get the property back. In most states the following legal issues are in place regarding the repossession process:

• The borrower must be made aware that the loan is outstanding and must be informed in the original loan agreement that default on the loan of a specific number of payments will result in repossession action by the lender.

• The individuals completing the repossession cannot commit any illegal acts or cause a breach of the peace in regards to obtaining the item. They cannot break into a house, garage or property that is secured to obtain the item.

• The company or agent cannot damage anything to obtain the item. This means they cannot pull items out of a house and put a hole in the wall or the kitchen cabinets or otherwise damage the property while removing a stove.

• The creditor or the repossession agents cannot threaten to or actually remove any property other than the item you owe money on. This means that they cannot, for example, take a boat that may be on a trailer that is attached to a truck that is being repossessed.

In the United States if a repossession company breaches any of these laws the repossession can be overturned through a court of law and the individual can also be awarded damages.