Repossession

Repossession is when a secured creditor exercises a contractual right to take possession of collateral following a default on a loan contract. Most frequently cars are the subject of repossession, but other sorts of collateral personal property can also be repossessed. The bankruptcy automatic stay prevents repossession.

Related Term: 
Secured Debt

Frequently Asked Questions

Our frequently asked questions also address Repossession:

Can I stop making my car payment prior to bankruptcy?

Generally, no. If a person desires to keep a car, generally it will be necessary to keep making the payments. Self-help repossession can occur very quickly, and very soon after a default (missed payment) on the loan contract.

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Blog Posts

We have discussed Repossession in the following posts on our bankruptcy blog:

Secured Credit 101: Security and Perfection

Jul 20, 2012

Consumer secured lending is a commonplace part of many household budgets. Major purchases like homes and cars are almost always financed, while other consumer transactions, like the purchases of furniture, electronics, appliances, and HVAC equipment are sometimes financed. A lender will often seek to retain rights in collateral as additional assurance that the loan will be paid. Sometimes, a consumer will pledge property they already own as collateral to a new loan, such as a home equity line of credit. In the legal lingo, these are all "secured transactions" aiming to create secured debts.

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Secured Credit 101: Priority of Liens

Jul 25, 2012

More than one creditor might have a claim to a security interest in collateral, especially valuable collateral. The most common example is a second mortgage or a home equity line of credit, when the homeowner has pledged the house as collateral, despite the fact a first mortgage exists. Just as the idea with one-lien collateral is that sale of the collateral provides an alternative source of payment for a loan, when there are multiple liens the idea is the sale of the collateral could in theory pay all of the loans. How does the law decide which creditor has greater rights? The law of secured transactions handles this with the concept of priority.

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