Repossession - Procedure of A Repossession

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 "lienholder") may repossess the object if the signers are past the grace period (generally for prime lenders the critical number is 69 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. Unscrupulous creditors may try to lull a debtor into a false sense of security by the use of a tactic sometimes called the "gab and grab." The creditor will orally agree to give the debtor extra time to make a payment—this is the "gab." But the creditor is only doing this to facilitate the repossession—the "grab." The creditor ignores the oral agreement to extend the time of payment and arranges for an immediate repossession. This tactic has been deemed unlawful by numerous courts. See, e.g., Demitro v. GMAC Corp., 388 Ill. App. 3d 15 (Ill App. Ct. 2009).

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.