Business

What Does It Mean When Property is Repossessed?

By
David F. Mills
on
April 26, 2021

If you fall behind on payments to a creditor for an item like a car, they have the right to “repossess” the vehicle. But what does this mean? How does repossession work, what rights do you have, and how can you avoid it? Let’s discuss this subject in more detail now.

If you fall behind on payments to a creditor for an item like a car, they have the right to “repossess” the vehicle. But what does this mean? How does repossession work, what rights do you have, and how can you avoid it? Let’s discuss this subject in more detail now.

Understanding The Basics Of Repossession 

Repossession is the most common when you fail to make payments on a car loan, but may also happen if you fall behind on payments on furniture, electronics, or other items from  “rent-to-own” companies. It even applies to homes, but home repossession is usually called “foreclosure,” and is different from other types of repossession.

Repossession can happen because when you buy a car or purchase an item that’s “rent-to-own,” the debt is “secured” by the value of the property. This means that until you pay off the debt, you do not own the property – the bank, lender, or rent-to-own company does.

Therefore, if you do not make your payments, the property can be confiscated and sold. This cost will be applied to your debt, but if there is any remaining debt, you’re still responsible for paying it off. 

How Can Repossession Be Avoided?

Repossession negatively affects your credit score, and can put you in a difficult financial spot. Depending on the situation, there are a few ways you may be able to avoid repossession: 

  • Modifying your payment plan with your lender
  • Catching up on your missed payments
  • Refinancing your car loan
  • Voluntarily surrendering the car or other items to your lender

What Happens If My Property Is Repossessed? 

Under North Carolina law, there are certain things that will happen once a lender has repossessed your car.

  • Your creditor can ask you to pay the late payments plus the cost of repossession to get your vehicle back. 
  • If you do not pay these costs, the creditor can sell the car privately or publicly. If it’s sold privately, the creditor must notify you of the date after which they will sell the car. If it’s sold publicly, they must notify you of the time, date, and place of the sale, and you can attend and bid on the vehicle.
  • After the car is sold, the sale will be applied to your loan balance. If you still owe money, this is called a “deficiency balance,” and you must pay this money to the creditor. However, your creditor must refund the difference if they sell your vehicle and the proceeds exceed your remaining loan balance.

Should I Consider Bankruptcy If My Property Is In Danger Of Being Repossessed? 

Filing either Chapter 7 or Chapter 13 bankruptcy puts an “automatic stay” on lenders, including auto lenders. Though there are exceptions, this means they can no longer repossess your car until the bankruptcy proceedings have taken place. 

However, bankruptcy is not something to be taken lightly. Before you think about filing, you should consult with a Smithfield bankruptcy attorney to discuss your financial situation, your other outstanding debts, and the details of your case.

Explore Your Options For Bankruptcy & Avoiding Repossession In Smithfield

Need an experienced Smithfield bankruptcy attorney to help you with a challenging financial situation? David F. Mills and the team at Narron Wenzel, P.A. are here to help you explore your options for avoiding car repossession. Take the first step toward a better financial future by contacting us for a consultation now.

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