When you take out a loan or contract that uses personal property as collateral (such as a car loan), the bank or other lender is a “secured creditor,” meaning they have an interest in your personal property as collateral.
This right is spelled out in the loan agreement or contract. If you fail to repay the loan, a secured creditor has the right to repossess the property (take possession of it). Personal property subject to repossession can be any tangible item of value that can be bought and sold in a marketplace.
Do I Need to Allow A “Repo Man” Into My House?
A “repo man,” or “repossession man,” is a distinct figure in the public imagination. In public consciousness, the repo man enters a person’s home by stealth and often at night to repossess an item of personal property. The “repo man” is believed to have the right to break doors and windows to get to the property. The repo man can, in the public imagination, even commit violence.
In reality, this “repo man” does not exist. A creditor can indeed send a representative to your home to attempt to repossess the property. However, a real repo man cannot enter your home by force. This person may not create a breach of the peace in an attempt to take possession of your personal property.
In other words, a real repo man may not cause a public disturbance by engaging in disruptive behavior such as banging loudly on a door for hours or shouting out threats. The creditor’s representative must attempt to repossess the property in an orderly, lawful manner.
Only law enforcement alone has the right to enter your home to repossess personal property. That can only happen if the creditor obtains a court order that gives the sheriff the right (and obligation) to repossess the property. In that case, you must give the sheriff access to your home. Getting the right to have a sheriff enter your home is not easy.
A creditor must apply for this court order. Usually, such orders are granted only after prior attempts by the creditor to repossess without the sheriff’s assistance have been unsuccessful. Sometimes, a court will issue the order if the property for which repossession is sought is highly expensive, such as a luxury car or an art collection.
You may not take any action that makes repossession nearly impossible. For example, if you are notified that the creditor intends to repossess, you may not hide the personal property. If the personal property is a vehicle, you may not conceal the vehicle, store it at an undisclosed location, or otherwise prevent a creditor from physically accessing it. Also, you may not destroy or damage the property to avoid repossession.
If, for example, the creditor informs you that the creditor will repossess your new couch, you are forbidden from destroying the couch. A creditor has the right to repossess the specific item the contract states can be repossessed, and if the property is inadvertently destroyed (such as by fire), the creditor is still entitled to recover the money owed on the debt.
What if I Have Legal Issues Regarding Personal Property Repossession?
When a creditor seeks to repossess personal property, the creditor must follow proper debt collection practices. These practices require the creditor first to give you that you are in default. The notice, which must be in writing, must provide that the creditor has the right to repossess the personal property. The length of notice that must be given depends upon the state where you reside.
Creditors often use debt collection agencies to do the repossession on their behalf. Debt collection agencies specialize in repossessing personal property and recovering debts. Debt collection agencies are regulated by state and federal law – a federal law known as the “Fair Debt Collection Practices Act” regulates collection agencies. These laws prohibit debt collection agencies from threatening or harassing you. Moreover, state and federal laws restrict the hours a collection agency may call you about a debt.
Under these laws, if you inform a debt collector you have hired an attorney to represent you in connection with the debt, the collector must after that communicate only with the attorney – not you. Per the laws, you have the right to require a debt collector to verify and validate the debt.
To verify a debt is to provide you in writing with the name of the creditor, the date of default, the amount owed, and other information required by law. To validate a debt is to provide documentation that shows a loan was made, that you knew payment was required, and that you didn’t make the payment(s).
You also have the right to request a payment plan. Before using a collection agency, many creditors will attempt to negotiate with you. During the negotiation process, you and the creditor work to arrive at a “settlement” figure. This figure is the value that both parties agree will satisfy a debt.
Typically, the settlement figure contains a repayment term and an interest rate. You and the creditor may agree, for example, that if you make monthly payments to repay a portion of the debt at a certain rate of interest, the debt will then be satisfied, and repossession will not take place.
Both you and the creditor will want to create a written settlement agreement. A debt settlement agreement is a contract. If you breach the contract by not paying the required amount, the creditor can go to court and file a lawsuit to recover the debt owed in the agreement. In addition, creditors are allowed to (and often do) add an “acceleration” clause to a settlement agreement. Under this clause, if a debtor misses a single payment, the entire amount owed becomes due immediately.
Not all debts are subject to repossession. Unsecured debts are not subject to repossession, for example. The most common type of unsecured debt is credit card debt. If you fail to pay credit card debt, the credit card company may not come and take the property that you bought with the credit card because the credit card company has no security interest in the property. The credit card company must go to court, file a lawsuit, and obtain a judgment that the money is owed. If you fail to pay your credit card debt, the creditor may be able to garnish your wages – this means take the debt from your paycheck – but the credit card company cannot take personal property to satisfy the debt.
Are There Defenses to Personal Property Repossession?
Several defenses to personal property repossession can be asserted. For example:
- If a debtor can prove the debt was already paid, repossession cannot take place
- If the debtor does not owe the debt, but rather, someone else does, repossession cannot take place
- If the statute of limitations has run out, repossession cannot occur. A statute of limitation is a limitation on the amount of time a creditor has to sue to recover personal property. All states have such statutes. For example, in Georgia, a creditor has four years from when the debtor stopped paying to recover personal property. If the creditor does not make any attempt to repossess the property or to file a lawsuit during that time, then if the creditor subsequently sues to recover the debt, the debtor may raise the statute of limitations as a defense.
Do I Need the Help of a Lawyer With Personal Property Repossession Issues?
If you owe a debt and face potential repossession, you should consult a debt collection attorney. A qualified debt collection attorney near you can explain your rights and options. Your attorney can represent you at negotiations and in court proceedings. One big advantage of hiring a lawyer is that once you hire a lawyer, the creditor cannot call you or write to you to demand payment – they have to deal only with the lawyer.
