With the current state of the economy, debt has become a common feature in the country. There are millions of Americans who are unable to pay back both small and large loans to creditors and still many more who are struggling to pay these creditors back. Many people today are unable to save money as a result and end up in deeper debt as they try to make ends meet or settle past debts.
One of the scariest things about owing money to a creditor is the thought of repossession. When you ask for money from a creditor on loan, they will usually ask for collateral. This is usually in the form of an asset that is of equal or more value to the loan that you are requesting. Many people put up their homes, cars and other large assets as collateral for loans. Although this may enable them to access the loan, some fail to make payments and find that their property has been taken from them by the creditor.
Creditors sell items or property that has been repossessed so that they can recover the money that they lent you. In many cases, creditors are anxious to get back their money. They are therefore willing to sell the property or asset and recover as soon as possible. Assets are therefore sold for much less than they are worth.
In most cases, you are considered to be in default of a loan if you don’t make full payments of the installments as agreed or if you don’t pay in time. However, many people forget that they can also be considered to be in default for insurance on items that they have financed such as cars.
Credit agreements and the laws governing them vary depending on the state in which the loan has been obtained. However, there are general guidelines that cut across states on what can and cannot be repossessed. The following property can be repossessed by a creditor:
- Your home – Cases of foreclosure are on the increase. If you fail to pay the installments on your mortgage, your creditor (financial institution that gave you a home loan) has the right to evict you and sell your home to recover the outstanding balance on the home loan. Research hardship mortgage debt relief programs if you are on the urge of losing your home.
- Your car – if you have not paid up your car loan, your creditor has the right to sell your car to recover the balance on your loan. If the car is sold for less than what is owed to the creditor you are likely to be held responsible for the payment of the balance. The balance could be settled on a debt settlement program.
- Property used as collateral – any property that you put up as collateral against a loan can be repossessed by the creditor this includes pieces of land, homes, cars etc.
- Any item that you rent to use with the option of purchasing the item in the long run can be reposed by the creditor if you default on the payment of installments as agreed upon. Such items can include furniture, TVs, electrical appliances and many other household items.
Make sure that you do not commit fraud by hiding assets from creditors. Although there are certain assets that are protected from creditors, hiding them can cause potential criminal liability. Doing so can wind up costing you more than the assets are actually worth.
Bankruptcy debt relief could resolve your unsecured and secured debt problems, but it will leave a long-term negative scar on your credit report.
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Trent Brock is a loan advisor for a bank in the midwest. He spends his free time blogging about financial matters that affect people in his community.
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