Repossession is a term used to describe a situation where the bank takes back possession of an item, product, or piece of property. In certain situations, the repossessing entity is not a bank, but some form of a financial lender such as a creditor. This can only occur if the person, or persons that the lender gave credit to have defaulted on their loans or payments.

1. Description

Repossession is a term used to describe a situation where the bank takes back possession of an item, product, or piece of property. In certain situations, the repossessing entity is not a bank, but some form of a financial lender such as a creditor. This can only occur if the person, or persons that the lender gave credit to have defaulted on their loans or payments. The way repossession works is that a person or persons borrow money from a financial institution to make a large purchase. This can be for a car, motorcycle, boat, vacation home, engagement ring, fur coat, or anything else that required a loan to purchase. The only way repossession can happen is if the person requests a loan for a specific item, and the financial institution has a record that this item was purchased. Once the item is purchased, the borrower has to follow the repayment options outlined in their loan agreement. When this borrower begins to miss payments, or does not make payments at all, the lender has the option to try repossession. They will make every effort to ensure that the loan is repaid, but if they are unable to reach the borrower and the borrower fails to follow their payments terms, repossession becomes an option. The lender can legally take possession of the item if these terms are not met or followed. In most cases, the lender will work with a collection agency or repoman to obtain the item.

2. Employees and Repossession

There are a few employees that a financial institution or lender might use to stage a repossession. The lender can obtain these employees by using a specific type of company that specializes in these types of services. The first type of company that a lender can use for a repossession is a collection agency. The goal of a collection agency is to handle the process of collecting on the loan. A collection agency might call the borrower several times a day in the attempt to contact the individual who borrowed the money. Many states do not have regular times, or any specific times that prohibit when a collection agency can call. At one point, collection agencies were not allowed to call on the weekends, and had to adhere to the hours of eight a.m. to nine p.m. on weekdays. They were also not allowed to call borrowers at work. Now, though, these rules have been eliminated, and a collection agency can call at any time. The collection agency will try to work out an arrangement with the borrower to either repay the money, or return the purchased item. If an agreement cannot be made, the next step in the repossession process involves the use of a repossession service. This repossession service will send out a repoman to find the item in question. The goal of the repoman is to take back the item with as little hassle and trouble as possible. If the item is an automobile or something that is kept outside the home, the repoman may actually wait for several hours before taking possession of the item. It is important to note that the repoman does not have to inform the person that they are taking the item, but can actually simply arrive and drive off in the car. The process can take as little as five minutes, or as long as several days or weeks.

3. When Repossession Happens

When a repossession happens, the borrower does not have to be informed of the repossession. They may receive a letter in the mail stating that unless payment is made, the item will be taken back by the financial institution or lender. This letter is also known as a notice, and should arrive by certified mail. The notice or letter will clearly state the terms that the borrower must follow, and be given a date when the money is due. If the money is not repaid, a second notice will be sent. This notice will state that the item in question is subject to repossession and will be taken back by a collection agency or repoman on a certain date. The repoman will arrive on that day to take back the item, and if it is not there or they cannot find the item, then they will continue to look for the item. There are some borrowers who will frequently hide the item in question in the hopes of saving it from repossession. The repoman will do whatever it takes to gain possession of that item, to the point where they may follow the borrower for several days simply to see where they have stored the item. Once the item has been taken, it is the responsibility of the borrower to make arrangements to pay off the loan or get their item back.

4. Repossession and Products

As stated before, for a repossession to take effect, there must be an item purchased on credit or through the use of a loan. Many people make the mistake of believing that a repossessed item must be something that was purchased by using a loan. In actuality, any item purchased on credit is subject to repossession. An engagement ring purchased through a jewelry store, a fur coat obtained from an exclusive store, or a car purchased through a secondhand lender are all examples of items that can be repossessed. The most popular items that are repossessed are typically vehicles, including boats and motorcycles. These are also the items that are most frequently hidden by borrowers. The borrower may hope that they can hide the item for a set period of time, and that the repossession process will somehow disappear or end. In actuality though, the repoman that is trying to take possession of the item will stop at nothing to find the item. There are cases where individuals have seen their car repossessed months after being alerted. They simply left the car running and returned to find it gone. In other cases, they hide their vehicle at a friend's house and arrive to discover that it has been repossessed.

5. Repossession and Property

There is mistaken belief among many that property cannot be repossessed. The reality is that property can be repossessed, but only in some states. Michigan, for instance, is one state where property can be repossessed. It is important that an individual examine the laws relevant to their own state to determine if their property can be repossessed. The repossession of property works in the same way as a typical repossession with a few notable differences. The individual will be warned that they have fallen behind on their payments, and a collection agency will make attempts to schedule a payment. The collection agency can call at any time of the day, and on any day of the week, as well as make calls to the borrower's place of business or job. Once it has been established that the borrower is unable to make payments, or unwilling to make payments, the property can be seized. The individual will be given a set period of time before they will be forced to vacate the property. If they do not leave by that date, local law enforcement may be called in to force the individual to leave. The house will then be sold at an auction run by the local sheriff's department with the proceeds going back to the lender.

6. The Impact of Repossession on Credit History

A repossession is also known as a default, or as defaulting on a loan. As a default, the repossession can and will stay on a credit report for seven years. The problem though is that a repossession can cause much more damage to an individual's credit history and overall credit score. Prior to the repossession, the individual will be late on their payments, or not make payments at all. Every time they miss a payment, or make a late payment, it makes a negative impact on their credit score. By the time the item is actually repossessed, the individual's credit score is already very low, and the repossession does little more than lower that score even more. There is some confusion as to when a repossession takes effect on an individual's credit score. This actually goes into effect the month after the last regular payment was on time. If an individual makes a payment on their car in January of 2005, then misses their next payments and the car is eventually repossessed, the default will be listed as taking effect February 2005. The repossession will then be part of the individual's credit report until February of 2012. In some states, a repossession can actually stay on a credit report for ten years, not seven. Anyone who has a repossession on their record should check with their state for their applicable rules. There are cases where a repossession is taken to court by the lender. In those cases, if a judgment is found against the borrower, the repossession may stay on their credit history even longer.

7. Items After a Repossession

Repossession auctions are one of the most popular places to find cheaper items that were once owned by individuals who could not make their payments. The items that are repossessed are almost always used. Even if the item was purchased brand new, and is only a few months old, it is still considered a used piece. Once an item is repossessed, it will be held in storage, typically a storage unit owned by the lender or a storage unit rented by the lender. The specific purpose of this storage unit is to hold repossessed items until an auction can be held. In some cases, this auction will be held in conjunction with an auction held by local law enforcement or the sheriff's department. The items will be a mixture of things the law enforcement department no longer needs, items seized during investigations, and sometimes even items from the evidence room, along with those repossessed items. Depending on the number of items the lender has accumulated through repossessions, they may hold their own auction as well. These auctions will be advertised in the local newspaper several weeks before the date of the auction.

8. Voluntary Repossession

Voluntary repossession is a term used by lenders and financial institutions to describe a process that is similar to the typical version of repossession. There are only a few differences between the two types. Prior to the possession, the individual will miss several payments on the item in question. A notice will be sent to the borrower from the lender to note the missed payments. A collection agency will then attempt to contact the borrower to set up payments. If those options fail, the lender will attempt to repossess the item. With a typical repossession, the borrower will receive a letter or notice in the mail that states a date on which the item will be repossessed. With voluntary repossession, the lender will give the borrower the option of staving off the repoman. Instead of sending a repoman directly to the borrower's home to take back the item, the borrower can voluntarily turn over the item. This will still stay on the individual's credit report and negatively impact their credit score, but they can avoid the repossession fees.

9. After a Repossession

After a repossession happens, it is the responsibility of the borrower to make arrangements with the lender. The lender has typically tried a variety of ways to contact the individual with little to no success. The individual may be taken to court by the lender if they attempt to escape the charges. If the court finds in favor of the lender, the individual will have to pay all the court fees, as well as fees associated with the repossession itself. The repossessed item will be sold at an auction held either by the lender or a local law enforcement agency. The item will typically sell for far less than its original cost, and it will be the responsibility of the borrower to pay the difference between its sell price, and the amount they owe. This money may come in the form of monthly payments, one lump sum, or the lender can request the borrower's wages be garnished until they are fully paid.
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