In the general sense, repossession can used to vividly describe a circumstance where the owner of an item reclaims or takes back the item that has been borrowed or rented by a borrower with some type of compensation or none added. It is also widely known as the scenario where a lienholder or loan financier recovers possession of an item that was used as collateral for a loan from its owner. Used as a self-help mechanism, it operates in a legal framework by transferring the property from the party with the right of possession to the party that has secured the right to ownership. After the process of repossession is complete, the item or asset can then be sold by the new owner. The transfer of the asset from the borrower to the lender doesn’t necessarily need to be carried out under the supervision of the court because the process itself is legally backed by the constitution of most countries. Various jurisdictions are, however, split on the manner in which a repossession process is sanctioned, and they also have different formats of its execution.

When a peculiar situation arises wherein the lender of the loan is unable to reclaim the item used as collateral, either because the item is nowhere to be found or the jurisdiction in the region doesn’t allow for such self repossession; then the lender is left with no choice but to follow a legal route known as replevin.

Repossession in various regions and jurisdiction

General practice

In most detailed practices of repossession, consent is sought from the court, which in turn grants and enforces the right of possession of the lienholder (the financial institution or borrower), freeing the party to reclaim the asset from the borrower.

The U.S

In the United State of America, the law provides that repossession is well legal and within the rights of any party as long as the process of enforcement doesn’t lead to the disturbance of peace. This minute condition attached to the provision should, however, not be taken with levity because if the disturbance of peace can be proven to have occurred during a repossession, then the repossession itself will be declared as invalid. The repossession of assets by a lienholder or a lending institution should therefore be handled with tactfulness and professionalism or else it risks losing ownership rights to the object even if the disturbance of peace is orchestrated by the debtor.

Procedure of repossession

In the U.S., the state laws permit creditors that have a security interest in items and goods to carry out repossessions if the borrower or debtor fails to pay back the borrowed amount as agreed in the contract signed by both parties. Article 9 of the UCC (Uniform Commercial Code), a code that has been fully implemented in the United States of America, specifically allows an owner of security interest to reclaim property from a borrower that has defaulted on payments as long as it is done without a breach of the peace.

Default in contractual terms actually means failure of the borrower to meet the terms that are stipulated in the contract, mostly in the form of repayment. Insurance coverage for cars or mortgages is a common default that usually brings about repossession.

Some additional laws have been made, however, specifically for automobile repossession; these laws ensure that the consumers are given every opportunity to redeem the contracts of their vehicle procurements seven after their automobiles have been repossessed by the lienholders or the insurance firms.

The process of redeeming a contract involves the payment of all past amounts due before the repossession occurred including the repossession expenses incurred by the creditor.

The United Kingdom

In the UK, the home of a defaulter can be reclaimed or repossessed by the lender if there is a default in the mortgage payments owed to the lender. Although this is referred to as mortgage repossession as well, it must be understood that an item or asset can only be repossessed from a debtor if the creditor is also the seller. While this is most often the circumstance when dealing with cars, it is a different matter when houses are involved. The appropriate term to use when houses are to be reclaimed is called possession.

The process of reclaiming a living facility from a debtor entails the granting of an order for possession by the court, which then issues an eviction notice to the debtor. An eviction enforced by bailiffs is carried out and the property falls into the possession of the lender, who can sell it to regain the lost funds.

Related Questions

Published on 16th June 2017

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