Repossession and Bankruptcy

Repossession is a process in which a creditor collects property that a person agreed to make payments and have defaulted on their payments of that item. Repossession occurs as stated in a purchase or credit contract for that item.  The purchase or credit contract specifies the creditor may take possession of the item if the debtor fails to make the scheduled payments.  The amount of time until the payment is considered delinquent may vary between contracts and usually includes additional penalties that cover the costs of repossession. The most common item that people have repossessed is an automobile. Because the value of an automobile depreciates faster than most other items, penalties for car repossession can be extensive. The debtor may have to pay the difference between the current value of the car and the actual the loan amount balance, in addition to towing or recovery agent costs.

There are many issues that arise when faced with repossession of property. Time and repayment limits are in place when the debtor signs the purchase or credit contract. The state of Texas, requires the debtor to repay the full balance owed on the property within 10 days of repossession in order to keep the property. If the debtor does not pay the balance owed in full within 10 days, the property is sold by the creditor in order to satisfy the outstanding debt.  If the property that is sold by the creditor does not cover the outstanding balance, the debtor is required to pay the remaining amount (also known as a deficiency balance).

What Are My Options?

There are a few options that are available to stop your property from being repossessed. The first option would be to repay all your delinquent amounts promptly and maintain your agreed payment schedule for the remaining of the purchase or credit contract. If you can’t afford to repay your delinquent amounts quickly, bankruptcy may be a better solution. Bankruptcy, places an automatic stay that stops creditors from collecting on outstanding debts. Creditors are required to cease collection efforts when a bankruptcy notification  has been filed.  If the debtor qualifies for Chapter 13 Bankruptcy, a qualified attorney will assist in requesting adjustments to repayment terms on behalf of the individual. The repayment plan will outline more favorable terms for making payments on delinquent accounts over a specified amount of time, usually 3-5 years.  If the debtor successfully completes the Chapter 13 plan, the lien will be removed and the person can keep their property. If you are facing repossession and do not have the financial means to repay your delinquent amounts or maintain your current  payment schedule, contact one of our experienced attorneys to find out how bankruptcy can help you.