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Definition of Repossessions
Repossession is generally used to refer to a financial institution taking back an object that was either used as collateral or rented or leased in a
transaction. Repossession is a "self-help" type of action in which the party having right of ownership of the property in question takes the
property back from the party having right of possession without invoking court proceedings. The property is then sold on by either the financial
institution or 3rd party sellers. The extent to which repossession is authorized, and how it may be executed, greatly varies in different
Procedure of a repossession
Repossession is usually carried out in accordance with a purchase contract or credit contract, in which the consumer agrees that the seller
(the "lien holder") may repossess the object if the signers are past the grace period (generally for prime lenders the critical number is 30 days
late making an installment payment but can vary based on how many payments have already been made, the length of the business relationship, reason why
past due, etc.). Contracts that authorize repossession also usually specify additional fines that the consumer must pay to the seller, ostensibly to
cover the seller's costs of the repossession and of depreciated value of the object, as the seller is now in possession of a "used" object. In some
places self-help repossession is not permitted; the lien holder is required to go to court to obtain an order of replevin. However, in some states,
repossession is mandatory and suits of replevin are not permitted.
If a lender finds itself in the situation of needing to repossess property while the borrower attempts to avoid this, the dealer may contract the
work of repossession out to a repossession agent. Many things can be repossessed, but most repossession agencies focus on auto repossession.
The repo agent normally uses a tow truck or pickup truck with a special towing attachment called a boom, but sometimes they pick the lock or obtain
the key from the car owner.
Usually the vehicle owner must be notified of a repossession. The repossession agent will find the car and check the VIN to make sure they have the
right car. They will then hook up the car to the tow truck and tow it away or pick the lock and drive it away.
Repossession does not necessarily satisfy the loan. If the repossessor sells the asset for an appropriate amount, and if that amount is less than
the amount of the loan, and if the repossessor sues the debtor for the balance (plus reasonable fees if applicable) in a timely manner, the debtor
may be liable to pay the balance (sometimes called the "deficiency").
Whether a debtor is actually liable for a balance depends on jurisdiction and on the details of the loan contract. In the case of a nonrecourse debt
for example, the debtor is not personally liable for a deficiency.
Repossession in various jurisdictions
The existence and handling of repossessions varies greatly between jurisdictions. In some jurisdictions self-help is limited to special circumstances,
so in general the right of possession can only be enforced by a court and/or other official agents.
When a provision of law requires when repossession takes place, the lien holder has a non-delegatable obligation not to cause a Breach of the Peace
(which is synonymous with disturbing the peace) in performing the repossession or the repossession will be reversed, and the party ordering the
repossession will be liable for damages (or the lien holder will be held responsible). This requirement not to breach the peace includes even if the
breach is caused by the debtor objecting to the repossession or resists the repossession. In MBank El Paso v. Sanchez, 836 S.W.2d 151, where a
repossession agent towed away a car even after the loanee locked herself in it, the court decided that this was an unlawful breach of the peace and
declared the repossession invalid. The debtor was also awarded $1,200,000 in damages from the bank involved.