What Is Repossession?
Repossession — the seizure of property that usually occurs as a result of nonpayment of a debt — can happen quickly and without warning. Although some lenders may technically be able to repossess collateral immediately after a missed payment, most repossessions take place on accounts that are 10 days or more past due.
Any item used to secure a loan or a line of credit can be subject to repossession if the debt goes into default. This can include your home (which means foreclosure), your car or any other item that you purchased with credit, such as furniture, electronics, appliances, boats and motorcycles.
How repossession works.
There are two types of repossession: involuntary and voluntary. Involuntary repossession occurs when the lender sends a debt collector to seize the defaulted property in order to secure the loan. Voluntary repossession, on the other hand, occurs when the borrower decides to surrender the collateral to avoid the additional costs incurred when there’s an involuntary repossession.
In both cases, the lender will sell the surrendered property to recover as much of the outstanding balance as possible. You will then owe any remaining balance not satisfied by the sale. You will be notified about the sale and can even participate in the bidding. However, keep in mind that only cash is accepted at auctions. If you had the money, you would likely have made the payments in the first place.