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Avoiding repossession from debt

Having assets repossessed can have devastating effects on your daily life, whether taking away your transport or even more of your needed assets, this is the ugly side of debt. Aside from the obvious, having assets repossessed has a terrible effect on your credit record.

Repossession

Falling behind on car payments, for example, can lead to the company that financed the purchase repossessing the car. Legally they are entitled to take the car back. In order to repossess the car the company would need an original court order with the stamp of the court present. This is something that you as the consumer need to scrutinize thoroughly, usually handed over by a sheriff of the court.

Learn the law

Research all the rights and rules regarding car repossession. When you are approached about it, it is best to understand what is happening and what the process should be. Looking online for information or contacting a consumer law attorney, do what you can to learn as much as you can about your rights and what legal implications there are for both sides. Also review the car loan agreement to ensure all is within the contractual allowances.

Auctioning it off

Once taken back by the finance company, your car will be stored and sold off at a public auction. With no promise to cover deficit, the company is only obligated to sell at a reasonable price. If the sale doesn’t cover your owed amount then you as the consumer will have to cover the rest- legally this is allowed.

Paying off the deficit

If the consumer cannot afford the full amount, payable in a lump sum, then an agreement can be set between consumer and creditor to allow for monthly repayment. Do not start paying back anything until the agreement has been put in writing.

What if the client cannot pay the debt?

If the creditor doesn’t allow you, as the client, to pay the deficiency through a monthly installments, the client can refuse to accept the demands as it could affect their ability to maintain priority expenses. If the debtor doesn’t accept the demands, the creditor can:

  • Turn the amount over to a debt collection agency
  • Sue the client for the right to claim the deficiency. If the creditor wins the lawsuit, it may request one of the following from the court:
    • Put a lien on one of the client’s assets, preventing the client borrowing against it or selling it
    • Seize one of the client’s assets, sell it and apply to proceeds to the debt
    • Garnish the client’s wages, receiving a portion of the payment for a limited time
    • Write off the deficiency and report it as uncollectable to the credit bureaus it works with

Getting your car back

Once repossessed, before being auctioned off, the client can take certain steps to get their car back.

  • Buy it back- buy paying back the outstanding amount you can repurchase the car
  • Reinstate your car loan- agree to resume paying the same installments under the same agreement as before
  • Talk to an attorney- check the agreement with an attorney to ensure all was fair in the repossession process

The best way to ensure things like this don’t happen would be to keep your car finance company in the loop. If you foresee issues with payment, you can approach them to have the terms of the agreement changed in line with your budget. You may also return the car out of your own initiative if you feel you will not be able to keep up payments. These both allow you to go around bad credit records and black marks.

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