Repossession and Bankruptcy
When a bank or lender takes back a secured item tied to a defaulted loan it is called repossession. A secured debt is one that is tied to a specific item, such as a home mortgage or car loan.
Secured loans are typically for a set amount, to be paid back over a specified amount of time, with an equal payment each month. Communication with the lender can sometmes lead to a one-time late payment to lower a monthly balance. Sometimes the debtor may be able to work with the lender to prevent repossession from happening.
Debtors may be able to file chapter 13 bankruptcy if the lender is unable or unwilling to negotiate. once the personal bankruptcy petition is filed a court order issued repossession can be stopped by the automatic stay, similar to home foreclosure.
When a person files a petition for bankruptcy the court imposes an automatic stay and a repossession is stopped. The person filing the petition for bankruptcy is a petitioner. A secured creditor is a creditor that takes action to repossess an item of property.
An automatic stay allows the petitioner to decide whether to eliminate the debt on the property or to restructure the payment obligation on the debt. If a certain piece of property is used as collateral to secure a loan a secured creditor ordinarily may repossess that property.
When a creditor who repossess property must sell the property to satisfy the unpaid balance on a loan. the creditor may take legal action against the borrower if the money from the sale is not enough to pay off the loan.
When a person files a petition for bankruptcy to prevent a repossession and a creditor has already repossessed a piece of property, the courts can enter an order that requires the creditor to return the property.