With personal property, after you default or fail to pay the secured lender, such as your car financing company, under the security agreement, the lender lender may:

  • Take possession of the collateral and sell it at a public or private sale, or
  • Lease, license or otherwise dispose of any or all of the collateral in its present condition,
  • In either circumstance, the creditor may be able to collect costs and attorneys fees for its efforts to recover and sell the asset.  You are however, entitled to a set off or creditor for the money it received for the sale.

The lender must be able to show that it acted in a "commercially reasonable" manner in preparing for and processing the sale of the collateral. All of this can be accomplished in a fairly short period of time.

Sometimes, when you file for bankruptcy, you may be able to recover the asset that was repossessed.  There is a relatively short period of time for this to occur and you  must act proactively.  If you retain an attorney to file bankruptcy, you  must tell them of the repossession. 

If you want to keep the asset after you file bankruptcy, you may be required to sign a reaffirmation or lease assumption agreement which provides that you will be responsible for the debt even though it would otherwise be discharged in bankruptcy.  If you chose to reacquire the asset after it was repossessed, you may be required to pay the costs associated with the creditor’s recovery of the asset before you filed bankruptcy. 

If your car or other property has been repossessed, contact Sterling Bankruptcy Center today to discuss your options.

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