If you miss making payment on your personal property - such as a car, motorcycle, or boat - your lender can take it back. Foreclosure is the legal name for when a lender repossesses personal property for non-payment. Each state has its own laws on foreclosures and borrowers' rights. In each state, however, missing payments can result in the eventual loss of your personal property.
Lien on Personal Property gives Foreclosure Rights
When you a buy a personal item on time, a lien is usually created. A lien allows the person getting payments to foreclose and take the personal property back if payments are missed. A person who sells you an item on time has first rights to foreclose. For example, you may buy a car on time from a dealership. Later, you may borrow money for college tuition using the car as collateral. In this situation, the car dealer is first in line to be paid and may foreclose first, since the dealer is the original lender.
Most Personal Property Liens Must Be Filed
Most personal property liens must be filed in the capital of the state where the property is located. Some personal property liens are filed on special forms called financing statements. Vehicle liens usually are listed right on the title to the vehicle. Most liens are public records. It is always a good idea to research public lien records before you buy personal property. Such a search tells you whether the property is free and clear, protecting you from buying something that may be at risk for foreclosure.
Foreclosure on Personal Property Don't Require Courts
Most personal property foreclosures do not require lawsuits. This is called non-judicial foreclosure. It means if you miss payments on personal property, you probably will not be sued or asked to go to court. You may receive a notice telling you that you are behind on your payments. You should make payments on time and never ignore a late notice since most states allow personal property to be taken back without having to ask for a judge's permission.
Repossession Rules
Sometimes your lender can take back property without notifying you. In some states, for example, a car parked in a open area may be taken for missed payment without anyone telling you first. If it is locked in your garage, a sheriff must usually get permission to break the lock and take it. Foreclosure of personal property ends with property being sold at an auction to pay overdue bills. Most states require you be notified before the sale. This gives you one last chance to pay the debt and save your property.
A Foreclosure Lawyer Can Help
The laws surrounding foreclosure and repossession of personal property can be complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a consumer protection lawyer or a lawyer who deals in personal property protection.