What are the Steps in the Repossession Process?

The repossession process often varies depending on the jurisdiction. In most cases, however, the process starts with late-payment reminders followed by a letter that lets the debtor know that repossession efforts will soon begin. If the debtor fails to pay after receiving such a notice, the creditor may then go on to seek a court order allowing it to take possession of the property, or the lending company may hire a repossession agent if a court order is not required. If the property that is being repossessed is a car, it may be towed away and sold. If the property is real estate, however, it may be sold in a private sale or auction.

Often, the repossession process starts with reminders that a person has fallen behind and failed to make payments as expected on his account. These reminders may be sent through the mail, via e-mail, or even by phone. In fact, some creditors use all three methods in an attempt to get the attention of debtors. Some creditors also offer payment arrangements in the hope of helping a debtor catch up on his bills.

When reminders about past-due bills do not work, many creditors will move on with the repossession process by sending an intent to repossess letter. For example, such a letter may inform an automobile loan borrower that the lending company will begin efforts to repossess the vehicle if an acceptable payment is not received by a specific date. The laws vary, however, on whether a lender has to send this type of letter before proceeding with the repossession process. Usually, such a letter would be sent before the repossession of a home, but some jurisdictions give automobile loan companies the right to repossess without such notice.

After sending a letter notifying a debtor of the intent to repossess property, a lender's next step may be requesting a court order that allows the repossession; in jurisdictions where a court order isn't necessary, they may simply begin repossession attempts. If the property is a house or other type of real estate, a court hearing is more likely to precede a repossession, also called a foreclosure. In many jurisdictions, however, cases that involve a car or other non-fixed property may not require a lender to seek a court's approval for repossession. Instead, such lenders may have the right to repossess property as soon as a borrower is in default.

When a car loan company repossesses a vehicle, it typically hires a repossession company to learn the whereabouts of the borrower’s car and tow it away. The laws regarding repossession of a car vary from place to place, but repossession agents are usually prohibited from using violence or threats to repossess a vehicle. Additionally, they are typically prohibited from breaking into a person’s garage to get to his car. They do not need the car owner's cooperation or permission to tow the car away, however.

In cases in which a repossession involves real estate, the matter is usually handled a bit differently. Once the lender forecloses on a person's home, the resident is required to move out. The lender may then take possession of the property and resell it or auction it off to the highest bidder.