Legal Definitions - Repossession

Repossession refers to the act where a lender (creditor) or their authorized representative takes back property from a borrower (debtor) because the borrower has failed to make payments as agreed. This property was originally offered by the borrower as collateral or security for the loan, meaning it was pledged to the lender as a guarantee that the debt would be repaid.

This process typically occurs when a borrower defaults on a secured loan, meaning they have not met the payment terms outlined in their contract. While repossession is often a "self-help" remedy for creditors, meaning they can take the property without a court order in many cases, it must generally be done without causing a disturbance or "breach of peace." If the repossession involves an unjust act or a violation of the creditor's legal duties to the debtor, it may be considered a wrongful repossession.

Here are a few examples illustrating repossession:

• Example 1: Recreational Vehicle Default

  A family purchases a new travel trailer, financing it through a bank. They agree to make monthly payments for five years, with the trailer itself serving as collateral for the loan. After a year, the family experiences financial hardship and misses three consecutive payments. Despite receiving notices from the bank, they are unable to catch up. The bank then hires a specialized service to locate and retrieve the travel trailer from the family's storage facility. This action is a repossession because the bank is taking back its collateral due to the borrower's default on the loan agreement.

• Example 2: Business Equipment Loan

  A small manufacturing company takes out a loan from a commercial lender to buy a new, high-tech industrial printing press. The loan agreement specifies that the printing press itself will serve as collateral. The company initially makes its payments, but a downturn in business leads them to miss several installments. After attempts to contact the company for payment are unsuccessful, the lender sends a team to the factory to dismantle and remove the printing press. This is a clear instance of repossession, as the lender is reclaiming the secured asset due to the business's failure to uphold its loan obligations.

• Example 3: Mistaken Identity (Wrongful Repossession)

  Sarah finances a new laptop through an electronics store's credit program. She diligently makes all her monthly payments on time. However, due to a clerical error at the store's financing department, her account is mistakenly flagged as delinquent. Without proper verification, the store sends an agent to Sarah's home to retrieve the laptop. When the agent arrives, Sarah provides proof of all her payments. If the agent proceeds with taking the laptop despite this evidence, or if the store had a contractual duty to verify default more thoroughly before acting, this would likely be considered a wrongful repossession because there was no actual default by Sarah, and the creditor violated a duty to ensure the repossession was justified.