Property Repossession Laws in Pennsylvania – 2022 Guide
Financial setbacks can occur to anyone. You may suffer a medical emergency, lose your job, or incur other unforeseen expenses. In these situations, it is easy to get behind on loan payments. When you fall behind on loan payments, you can be at risk of repossession.
When you accept a loan from a bank, finance company, or other lender, the creditor has a security interest in some of your property. If you fail to satisfy your obligations under a loan, your creditor has a right to repossess the property in which it has a security interest. However, bankruptcy is a tool that could protect you from creditors and improve your financial situation.
If you have fallen behind on loan payments, speak with our Pennsylvania bankruptcy lawyers about how filing for bankruptcy could benefit you by calling the law firm of Young, Marr, Mallis & Deane at (215) 701-6519 for a free consultation.
What is a Repossession (Repo) Company?
A repossession company is a business that offers repossession services like collateral recovery to lenders. These companies use repossession agents (“repo men”) to take back property from borrowers that have defaulted on a loan. In Pennsylvania, a repossession company has to be licensed as a collector-processor with the Department of Banking and Securities of the Commonwealth.
What Can Lenders Do to Repossess My Property?
Creditors cannot repossess your property unless there is a written security agreement signed by you that identifies the property to be repossessed. Furthermore, creditors in Pennsylvania cannot repossess your property unless they can do so peacefully. In other words, a creditor cannot simply walk into your home and take your property. However, lenders are able to repossess items if they can do so without breaching the peace. For example, a repossession company may be able to tow your car to repossess it from your driveway or from public property.
You have the right to tell a creditor who comes to your door that they cannot take property back and cannot enter your home. It is unlawful for a creditor to enter your home or take your property after you deny them. If you tell a creditor that they cannot take your property, the creditor will need to go to court to repossess it. Although, involving the court system may increase costs incurred by a borrower.
Lastly, when a repo company breaches the peace, you can file a complaint with the Department of Banking and Securities of the Commonwealth. Our Philadelphia bankruptcy lawyers can help when filling such a complaint. A complaint for breaching the peace may result in the revocation of a repossession company’s license.
Does a Creditor Have to Give a Warning Before Repo?
Pennsylvania creditors may not have to give warning before repossession. However, notice is required in certain circumstances. If the property to be repossessed is a mobile home, it cannot be taken without a 30-day written notice and opportunity for the borrower to catch up on payments and fees.
Furthermore, personal property other than a vehicle may not be repossessed without first giving the borrower a 21-day notice and a chance to make up missed payments. Our Chester County bankruptcy lawyers can assist you if your property was improperly repossessed without warning.
What Property Can Be Repossessed in Pennsylvania?
Pennsylvania has established specific rules governing what property can be repossessed. Certain types of property are repossessed more frequently than others. However, there is a variety of items that can be used as collateral. The following items can be repossessed in Pennsylvania:
Vehicles are one of the most common types of property that are repossessed in Pennsylvania. Auto lenders typically retain the right to repossess a car if a buyer defaults on their contract. Buyers can default on their contract by missing monthly payments, allowing their auto insurance to lapse, or failing to comply with provisions in a loan agreement.
Furthermore, other vehicles such as boats and planes may also be repossessed in Pennsylvania. Vehicle owners who are struggling to make payments may consult with our Delaware County bankruptcy lawyer for help regaining financial stability.
Many people question will happen to personal property in your car after a vehicle repossession. In Pennsylvania, you have 30 days from the date of notice of the repossession to pay off and recover your property. After 30 days, a repossession company may dispose of your personal property (e.g., sell it to someone else).
Rent to Own Items
Some items are rented with the option of purchasing the item in the future. For instance, home furniture, office furniture, computers, tools, and televisions are some items that may be rented with the option of purchasing in the future. These items may also be repossessed by lenders in Pennsylvania if a borrower fails to satisfy their rental agreement. Our Allentown bankruptcy lawyers can answer questions regarding your rental agreement if you are concerned that an item may be repossessed.
Personal Property Used as Collateral
Any type of personal property used to secure a loan may also be repossessed if the borrower defaults on the loan. Jewelry, vehicles, stocks, fine art, future paychecks, and cash in a savings account are all among the many forms of personal property that can be used as collateral for a loan. However, this occurs much less frequently in Pennsylvania. Most lenders will not accept personal property as collateral.
Furthermore, creditors cannot take property that was not identified as collateral. A lender cannot just take any item they want to satisfy a debt. However, if a creditor sues a borrower and wins the case, a police officer may come with a court order to take away other property from the borrower to repay the debt.
Real Property Cannot Be Repossessed
Your home cannot be repossessed, even if it is collateral for your mortgage loan. There is a different legal process known as foreclosure for houses. Some people may refer to losing property to foreclosure as repossession, however foreclosure is entirely different and involves a more complicated legal process. Any real property such as your home, vacation home, or rental property must be foreclosed on before a lender may take possession.
What Happens to Repossessed Property in Pennsylvania?
Typically, after property is repossessed, a creditor will try to sell it. However, lenders must give borrowers written notice of the time and location of the sale. For example, many repossessed vehicles are sold at auctions. In such cases, the lender is required to provide the borrower with written notice of the time and location of the auction where their vehicle is to be sold. Although, before repossessed property is sold, borrowers will have the option to get their property back if they pay the full amount owed or make an agreement with their creditor to make up payments.
Borrowers should attend the sale of their repossessed property to ensure that the sale was performed in the best possible manner to get the most beneficial outcome. The money the creditor acquires from a sale will be applied to the borrower’s debt. As such, if your property was repossessed, you want it to be sold at the highest possible price. If your repossessed vehicle was sold well under the appropriate value, then you may not be liable for any remaining payments leftover on your loan.
Our Bethlehem bankruptcy lawyers can help determine if the sale of repossessed property was not executed in the right manner. If your property is not successfully sold at an auction but you know people who are willing to buy the property, you should obtain written bids from the potential buyers and inform the lender.
What if the Sale of My Property Does Not Cover My Debt in Pennsylvania?
If the amount your repossessed property is sold for does not cover your outstanding debt, you may still have to pay the amount owed even if you voluntarily gave up your property to the creditor. For example, if you owe $20,000 on a vehicle that is repossessed and sold at auction for $12,000, then you may still be liable for the remaining $8,000.
If the repo was performed legally, your creditor has the right to sue you for the remaining amount owed after an insufficient sale. In such cases, you may have limited time to respond to your creditor. You should immediately consult with our West Chester, PA bankruptcy lawyers if your creditor is suing you for an outstanding debt after your repossessed property has been sold.
However, you may not have to pay your outstanding balance if your creditor broke the law while repossessing or selling your property. Furthermore, you may even be able to sue your creditor in such situations. For instance, if a lender did not notify you of the time and location of an auction where your repossessed vehicle was sold, you may not be responsible for any leftover debt and could be entitled to file a legal action against the lender.
How to Avoid Repossession in Pennsylvania
Of course, the easiest ways to avoid repossession is to avoid acquiring debt and to avoid missing payments on loans. Unfortunately, this is not always possible. Financial crises can occur to anyone. However, there are certain things to remember before taking out a loan that can help you avoid having your property repossessed in Pennsylvania:
Know Your Budget
You should have a clear understanding of what you can afford. It can be difficult to adhere to a budget and you may be pressured to purchase fancier, more expensive items on occasion. However, you must avoid purchasing something that will exceed your budget.
Furthermore, you should resist sales people who attempt to upsell you. Salespeople rarely have your best interests in mind and will frequently try to talk you into buying something more expensive. Do not let salespeople upsell you on expensive items that may cause a financial crisis.
Prepare for Income Fluctuation
Additionally, you should also be prepared for income fluctuations they may experience after incurring a debt. For example, if you are planning to buy a car then you should make sure there is room in your budget to afford payments even if your income drops. Unforeseen circumstances that affect you job status can be financially devastating after taking out a loan.
Be Aware of Interest Rates
Furthermore, interest rates should always be considered before borrowing from a creditor. Interest rates are the proportion of a loan that is charged as interest to the borrower. These rates are typically expressed as an annual percentage of the remaining balance on a loan. High interest rates may cause borrowers to fall too far behind on a loan to ever catch up. Furthermore, any additional charges that may be added to the debt should be considered before entering into an agreement with any lender.
Communicate with Creditors
It is also important for borrowers to communicate with lenders. If you are having trouble making payments on a loan, you should notify your creditor. If creditors are aware of financial problems ahead of time, then they are more likely to accommodate you. Lenders may help you resolve the issue by extending the period for repayment or refinancing your loan. Refinancing describes situations where the terms of an existing loan – such as interest rates, payment schedules, or other terms – are revised.
Filing for Bankruptcy
For some borrowers, filing foor Chapter 13 bankruptcy will be the best way to resolve credit problems and avoid having their property repossessed. Chapter 13 bankruptcy is also known as reorganization bankruptcy and gives borrowers the chance to pay back debts on a court-mandated payment plan, typically 36 to 60 months.
Other borrowers may have to file for Chapter 7 bankruptcy, also known as liquidation bankruptcy. Chapter 7 bankruptcy involves selling all of a borrower’s property to pay off their debts. This option is more typical for borrowers who do not own a home or who have limited income.
However, filing for bankruptcy comes with inherent risks. Our experienced Northeast Philadelphia bankruptcy lawyers can examine your case and help you determine whether filing for bankruptcy the right course of action for you.
If Your Property Has Been Repossessed in Pennsylvania, Our Lawyers Can Help
If your property has been repossessed or is at risk of repo, get help by calling the Easton, PA bankruptcy lawyers at Young, Marr, Mallis & Deane at (215) 701-6519 for a free consultation.