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Repossession, Reinstatement, and Redemption: What Do These Terms Mean?

It’s a question that’s always lurking at the back of the minds of anyone who’s ever applied for a loan: “what happens if I can’t pay it back?” Very few people enter into a loan or mortgage agreement without having a repayment plan of action. But, anyone who has ever fallen behind or defaulted on a payment, knows how frightening the thought of repossession can be.

Repossession is a very real possibility whether you have taken out a mortgage loan in Salt Lake City or a car loan in California. And knowing that basics of repossession can help you avoid falling into it.

What Is Repossession?

Broadly defined, repossession refers to the act of a creditor taking back a specific property after the borrower or debtor on a contract or terms of payment. Repossession happens if the borrower has defaulted on the loan or has violated a term in the contract such as failing to keep up with the annual or monthly repayments on the property or item in the debtor’s possession.

Repossession is implemented differently across states and jurisdictions, so it’s best to keep yourself informed of the laws that govern your state. The most important thing to remember is that your lender may have full legal rights to seize your property without invoking any action from the court, depending on the contract or agreement. It is also important to note that there are two legal distinctions that form much of the basis for arguing whether or not something is “really” yours or otherwise: right of ownership and right of possession. The former refers to a party having full legal rights over property in question, while the latter refers to someone who has merely been given temporary rights to the property while they are in possession of it, but the property really isn’t theirs.  On one hand, you have maintained the item and invested something in the property separate of the owner’s influence. But on the other hand, you don’t have the ownership of the property, so it can be taken away from you at any time.

So, What Can You Do?

couple talking to a lawyerIf you are facing repossession, there are some things that you can do to either head it off or resolve the issue before it escalates. While the most ideal way is to talk to your lender or settle things out of court, states do offer two ways to get your stuff back:

●       Reinstatement, where you pay off the balance and the fees incurred during the repossession, regaining control over the property and continuing with the loan period

●       Redemption: where you pay off the cost of the property and claim it from the repossessor with all legal rights transferred to you

Either way, you should be aware of your legal rights and the actions you can take when it comes to regaining something that’s been seized from you. If you’re unsure about the legal rules and ramifications surrounding repossession and recovery, calling your local lawyer or mortgage company will definitely help.