Monday, April 22, 2013

http://en.wikipedia.org/wiki/Repossession

Repossession

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The examples and perspective in this article may not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page. (December 2010)

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. 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. The property is then sold on by either the financial institution or 3rd party sellers. The extent to which repossession is authorized, and how it may be executed, greatly varies in different jurisdictions (see below).

Contents

[edit]Procedure of a repossession (United States)

In the United States, repossessions are carried out pursuant to state laws that permit a creditor with a security interest in goods to take possession of those goods if the debtor defaults under the contract that created the security interest. In particular, all 50 U.S. states and the District of Columbia have enacted (with minor variations) Article 9 of the Uniform Commercial Code, which generally permits security interest holders to repossess goods if a debtor is in default and the repossession can be conducted without a “breach of the peace” (i.e., without breaking the law).^[1]Being “in default” means that the debtor has failed to fulfill his or her obligations under the contract. The most common forms of default resulting in repossession are failing to make required payments and failing to maintain adequate insurance coverage.

Many U.S. states have enacted additional laws that apply specifically to the repossession of purchased and leased automobiles, and which are intended to afford additional consumer protections.^[2] Typical requirements include mandating that auto lenders provide consumers with opportunities to either “reinstate” or “redeem” their purchase or lease contracts after their vehicles have been repossessed.^[3] A “reinstatement” entails a consumer paying all of his or her past due amounts plus the creditor’s repossession expenses, and then reacquiring the automobile as if the repossession had not occurred. A “redemption” entails the consumer paying off the entire contract balance and then being given ownership of the vehicle free and clear of any contract obligations.

Many consumers mistakenly believe that they are legally entitled to a “grace period” that prevents creditors from repossessing goods until the payments are a certain number of days overdue. In reality however, grace periods are non-compulsory business practices that have been adopted by most consumer lenders.^[4] There is nothing legally preventing a creditor with a security interest from repossessing the goods if a payment is late (even if it is only one day overdue). The only exception to this rule is if the creditor does or says something to lead the debtor to believe that the goods will not be repossessed notwithstanding a late payment. If a creditor tells a debtor that a payment may be made a particular number of days late, and then repossesses the goods before that date, the creditor is guilty of conversion (law) (i.e., civil theft).^[5] That being said, unless the consumer received permission to make a late payment in writing, it may be difficult for him or her to later prove that the creditor agreed to permit the late payment. Because of the difficulty proving oral statements, some unscrupulous creditors try to lull debtors into false senses of security with a tactic sometimes called the "gab and grab." The creditor will orally agree to give the debtor extra time to make a payment—this is the "gab." But the creditor is only doing this to facilitate the repossession—the "grab." The creditor ignores the oral agreement to extend the time of payment and arranges for an immediate repossession. This tactic has been deemed unlawful by numerous courts. See, e.g., Demitro v. GMAC Corp., 388 Ill. App. 3d 15 (Ill App. Ct. 2009).

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. Many things can be repossessed, but most repossession agencies focus on auto repossession.

The repo agent normally uses a tow truck or pickup truck with a special towing attachment called a boom, but sometimes they pick the lock or obtain the key from the car owner.

Usually the vehicle owner must be notified of a repossession. The repossession agent will find the car and check the VIN to make sure they have the right car. They will then hook up the car to the tow truck and tow it away or pick the lock and drive it away.

Repossession does not necessarily satisfy the loan. If the repossessor sells the asset for an appropriate amount, and if that amount is less than the amount of the loan, and if the repossessor sues the debtor for the balance (plus reasonable fees if applicable) in a timely manner, the debtor may be liable to pay the balance (sometimes called the "deficiency").^[6]

Whether a debtor is actually liable for a balance depends on jurisdiction and on the details of the loan contract. In the case of a nonrecourse debt for example, the debtor is not personally liable for a deficiency.

[edit]Repossession in various jurisdictions

[edit]General

The existence and handling of repossessions varies greatly between jurisdictions. In some jurisdictions self-help is limited to special circumstances, so in general the right of possession can only be enforced by a court and/or other official agents.

[edit]United States

When a provision of law requires when repossession takes place, the lien holder has a non-delegatable 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 the debtor objecting to the repossession or resists the repossession. In MBank El Paso v. Sanchez (1992), 836 S.W.2d 151, where a repossession agent towed away a car even after the loanee 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 involved.

[edit]United Kingdom

[edit]England and Wales

These numbers and text relate to home mortgage repossessions in England.

Number of repossessions in England

Year	Claims Issued	Claims Leading To An Order	Properties Taken Into Possession
1990	145,350	103,508	43,900
1991	186,649	142,905	75,500
1992	142,162	126,881	68,600
1993	116,181	105,283	58,600
1994	87,958	77,681	49,200
1995	84,170	75,258	49,400
1996	79,858	71,203	42,600
1997	67,073	57,156	32,800
1998	84,836	66,055	33,900
1999	77,818	53,448	29,200
2000	70,140	48,403	22,900
2001	65,555	45,812	18,200
2002	62,862	40,430	12,000
2003	65,373	39,784	8,500
2004	76,993	45,356	8,200
2005	114,733	68,922	14,500
2006	131,248	88,018	21,000
2007	137,725	90,654	25,900
2008	142,741	111,763	40,000
2009	N/A	N/A	48,000^[7]

Source: Council of Mortgage Lenders and The Ministry of Justice.^[8]

In 2010, there looks to be a downtrend though, as lenders seized 9,400 properties in April, May and June, 400 fewer than in the first quarter of 2010, according to the Council of Mortgage Lenders (CML).^[9]

However, repossession law firm Moore Blatch^[10] advises that whilst the number of repossessions is falling, the number of people in arrears by 3 months or more is actually significantly higher. At the end of June 2009 the number of people in arrears by 3 months or more was 270,400 compared with 264,700 in the first quarter, and 152,700 in the second quarter of 2008 - a 77% increase over 12 months. The alternative quoted measure of arrears, preferred for historical comparisons, is the number of loans in arrears by 2.5% or more of the outstanding mortgage balance. The number of loans in arrears by 2.5% or more totalled 205,600 (1.85% of all loans), which was only 1,700 higher than the previous quarter’s figure of 203,900, but a 46% increase from 139,700 at the end of the second quarter of 2008.^[11]

Average repossessed sales price.

Region	HPI Regional Average* (£)	whitehotproperty.co.uk average** (£)	Percentage difference
South East England	206,426	181,947	-13.5%
East Anglia	158,205	140,503	-12.6%
North England	134,311	123,368	-8.9%
Greater London	241,306	224,833	-7.3%
South-West England	179,428	167,846	-6.9%
Yorkshire & Humberside	120,988	114,725	-5.5%
East Midlands	135,873	131,988	-2.9%
West Midlands	152,598	150,329	-1.5%
North West England	123,795	129,757	+4.6%
AVERAGE	161,437	151,700	-6.4%

*Source: Halifax Price Index Regional Price Update - Q2 (April–June 9)
**Source: Properties sold by Whitehot Property^[12] - Q2 (April–June 9).

[edit]Germany

Repossession in the form of self-help is generally illegal, and an act of self-help repossession constitutes theft. In almost all cases, if the debtor is unable or unwilling to pay an outstanding debt, the creditor must first obtain either a court order authorising the repossession (Vollstreckungsbescheid, only possible if the debtor does not contest the debt) or a regular court judgment. The debt must then be collected by an officer of the court (Gerichtsvollzieher); only this officer of the court may use force (such as forcing open a door, or enlisting help from police forces) to collect the debt. In particular, neither the creditor nor private debt collection agencies may use force or seize property against the will of the debtor.

Some very specific forms of self-help repossession are legal. For example, a landlord may seize the tenant's property in the rented object if there are outstanding payments.^[13]

[edit]See also

Foreclosure

[edit]References

[edit]External links

Personal finance
Property
Personal property law