Repossession

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. Note that 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.

This is usually done 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 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 lienholder is required to go to court to obtain an order of repletion. However, in some states, repossession is mandatory and suits of repletion 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.

A provision of law, requires when repossession takes place, the lienholder has a non delegated 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 lienholder will be held responsible. This requirement not to breach the peace includes even if the breach is caused by, say, the debtor objecting to the repossession or resists the repossession. In the court case of M and I Bank El Paso v. Sanchez, 836 S.W.2d 151, where a repossession agent towed away a car even after the loan 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.

Repossession is not normally the mechanism for lenders to take possession of a home.

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