Sep 2nd, 2010 | Written by daniel | Posted in Finance and Money |

Since the general economic downturn began in 2008, repossession has been a major issue for an ever growing number of consumers.

As a general rule, when a lender takes possession of an asset though it has not been paid off in full, this is considered a “secured debt” since the debt is secured against the repossession of the asset in question. Essentially a home foreclosure is a repossession of a house (or other property), though in the United States the term “repossession” usually refers to property other than real estate such as motor vehicles. In any case, repossession is more or less at the discretion of the lender – though usually subject to some governing rules and laws in any given jurisdiction – which means there are a number of effective ways to stop repossessions.

Since the option of repossessing property is usually in the hands of the lender, the first thing that people fearing repossession should probably do is contact the lender. This is particularly true is the debtor knows that financial difficulty is coming, but they have not become delinquent yet; though it is just as applicable to situations where the debtor has already begun missing payments and the like. Usually repossession costs the lender money, so if an alternative can be worked out, sometimes the lender is willing to work with the borrower in this respect. Debt settlement negotiations and/or debt restructuring (so as to lower the regular payments due) are common proposals accepted by lenders as an alternative to repossession, especially for assets that depreciate quickly, like motor vehicles.

If the lender is set against any compromise and all efforts to work out some sort of alternative arrangement have failed, another way to stop repossession is to file for bankruptcy. Section 362(a) of the U.S. Bankruptcy Code creates an “automatic stay” that stops any and all collection activities by lenders against debtors pending the outcome of the bankruptcy proceedings and this includes any efforts at repossession. However, it should be kept in mind that Chapter 7 bankruptcy (or “straight” or “traditional” bankruptcy) only has limited applicability to secured debt, so if the primary issue is foreclosure or the repossession of other assets, Chapter 13 bankruptcy may make more sense.

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