Foreclosure & Alternatives Law

Defenses to Repossession

It can be tough to get a lender to loan you money. The process can be less painful if you provide the lender with collateral, or a security interest, such as the property you intend to purchase. This is a common practice, and it means giving lenders a reason to care about the property you are purchasing with the loan money.

Most lenders who provide loans for cars and real estate take security interests in the property you are purchasing with the loan money. This means that if you default on the loan, the lender can repossess the property and sell it to get some of their money back.

You May Be Able to Stop Repossession

While it may seem obvious that a lender can repossess your property, this is not always the case, even if the lender has a security interest in that property.

In some cases, you may be facing wrongful repossession. You will need an attorney to help you stop this process. You can learn more about repossession of cars in our video library.

You always have the legal right to raise a valid defense that may delay or stop the property repossession. Some common defenses to repossession are below.

The Lender Does Not Have the Right to Repossess the Property

You may assert that the lender does not have the right to repossess the property if:

  • Your loan agreement does not give the lender a security interest in the property
  • You did not violate any terms of the loan agreement that would allow the lender to repossess the property

If you maintain the required insurance on the property and make all of your payments on time, for example, then the lender may not be able to repossess the property.

Similarly, if the loan did not specify a valid security interest in the property, then the lender does not have the right to repossess the property.

The Lender Did Not Provide the Required Notice

Many states require lenders to provide you with written notice before repossessing your property.

That notice must inform you of your right to pay the outstanding loan balance and contain all of the disclosures required by state law. California, for example, has nine special disclosures.

If those disclosures are not present, then you may have a defense against the lender's attempt to repossess your property.

The Lender Did Not Provide an Opportunity to 'Cure' Before Repossession

Most states require that the repossession notice provided by the lender include a date when you can:

  • Pay what you owe on the loan
  • Avoid repossession

If your lender does not give you the opportunity to pay the loan off before repossession, then you may have a defense against the lender's attempts to repossess the property.

In addition to these defenses to repossession, you may be able to collect damages if the lender:

  • Breaches the peace
  • Otherwise violates the law

These cannot happen during the repossession process. If this occurs, even if it was a lawful repossession to which you did not have a defense, you may be able to collect damages.

For the reasons above, it is essential to remember that repossession is not always the final answer.

You may have defenses to repossession. These can allow you to:

When to Ask For Help During Repossession

A repossession may mean you are behind on payments because of financial troubles. Hiring an attorney or other professional might seem impossible when you are short on money. However, using a professional to review documents or the lender's repossession process may help you keep your property.

The minute you learn you are facing repossession, you should review all the documents and information available. If anything is not clear to you, get help right away. If you suspect the lender did not follow the rules outlined above, call an attorney and discuss the situation. There is a chance you can avoid repossession and protect your rights before the situation gets any worse.