Legal Definitions - Repossess

Repossess refers to the act of a creditor or lender taking back possession of property that was used as collateral for a loan, typically because the borrower has failed to make the agreed-upon payments.

This action is usually permitted by the terms of a loan agreement, which grants the lender a security interest in the property. When a borrower defaults on their obligations, the lender exercises their right to reclaim the property to recover some of the outstanding debt.

Here are some examples:

• Example 1: Vehicle Loan Default

  A person purchases a new truck using a loan from a bank. After several months, they lose their job and are unable to make the monthly loan payments. According to the loan agreement, the bank has a security interest in the truck. After the borrower misses multiple payments, the bank sends a team to repossess the truck from the borrower's driveway. The bank will then typically sell the truck to recoup some of its losses.

  This illustrates repossession because the bank, as the lender, takes back the truck (the collateral) due to the borrower's failure to meet their payment obligations.

• Example 2: Rent-to-Own Furniture Agreement

  A family enters into a rent-to-own agreement for a new living room set. Under the terms, they make weekly payments, and after a certain period, they would own the furniture outright. However, after several months, they fall behind on their payments. The rental company then sends a representative to repossess the furniture from the family's home.

  This demonstrates repossession as the rental company reclaims the furniture because the family defaulted on the payment terms of their agreement, which effectively allowed the company to maintain ownership until all payments were made.

• Example 3: Business Equipment Financing

  A small bakery takes out a loan to purchase a new commercial oven, with the oven itself serving as collateral for the loan. Due to unforeseen business challenges, the bakery struggles financially and misses several loan payments to the equipment financing company. After proper notification, the financing company arranges to repossess the commercial oven from the bakery.

  This example shows repossession where the financing company takes back the oven (the business equipment used as collateral) because the bakery failed to uphold its end of the loan agreement by not making the required payments.