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When you owe a lot of debt, creditors and collections agencies will often try to get their money back. But when a debtor doesn’t have the ability to pay, creditors will sometimes attempt to repossess an individual’s property.
Repossession is the legal act of reclaiming property when a debtor defaults on his or her loan. For example, if someone defaults on his or her car loan, a creditor can often take back the vehicle. This is because car buyers are usually required to sign a security agreement that gives the lender the right to take the car back should he or she be unable to pay. In other words, the vehicle becomes collateral for the loan and can therefore be repossessed.
While all of this can be very disheartening, there are still certain legal defenses to repossession. It’s also important to note that if a creditor has continually accepted late payments or if there is a grace period, a debtor is not yet considered to have defaulted.
A Creditor’s Rights
Creditors can usually begin the repossession process as soon as a borrower defaults on his or her loan. However, it’s important to note that a creditor can’t just steal the vehicle. Anyone acting on the creditor’s behalf cannot take the vehicle in a manner that would be illegal. Once a vehicle is repossessed, it can be sold so that the creditor can obtain remaining compensation on the loan.
A Debtor’s Options
Bankruptcy is often a favorable option for many debtors since it stops the repossession process through an automatic stay. Bankruptcy, which is often used when someone has issues with their debt, can actually allow you to protect your personal property by stopping all collections on outstanding debt – even repossession and wage garnishment.
After Repossession
Once a creditor has repossessed a vehicle, it must be sold in a commercially reasonable manner. However, a debtor remains entitled to certain notices, such as a notice of default and the right to cure within a period of five business days. This notice must include the amount of money that the debtor owes and must pay in order to get back the vehicle. Additionally, the debtor is obligated to pay various fees such as late charges, reasonable expenses, a deposit, and past-due installments.
Ten days before the sale of the repossessed vehicle, the creditor must provide the debtor with another notice of the time and place of the vehicle sale and the minimum price for the vehicle. Additionally, it must include what the debtor will owe after the sale – if he or she is to owe anything.
A repossessed vehicle must be sold for a reasonable amount of money since the proceeds from the sale will go to paying off what remains of the loan. If the sale does not collect enough to pay for what is left on the loan, the lender can still file suit to collect the remainder.
A debtor may be able to figure out a repayment plan with the agency. But if not, bankruptcy may just be the best option. It is important to get all of the available information from a qualified bankruptcy attorney.
Toronjo & Prosser Law Helps Those Who Are Dealing with Bankruptcy
It’s undoubtedly stressful to realize that you don’t have enough money, and even more stressful when you realize that filing for bankruptcy may be your best option. The process of filing for bankruptcy can be extremely complex and confusing.
When you are going through the bankruptcy process, it’s in your best interest to consult with a knowledgeable and experienced Texas bankruptcy attorney. He or she can help you to identify important documents needed to file for bankruptcy as well as help you to avoid mistakes that could really cost you.
At Toronjo & Prosser Law, our qualified Dallas Bankruptcy Attorneys can help you to navigate the process. To learn more or to schedule a free consultation contact us online or call us today!