Two of the biggest threats that creditors use are repossession and foreclosure. With the possible exception of wage garnishment, those two threats lead people to bankruptcy more than everything else. If you are going to make an informed decision about filing bankruptcy or if you are already in a bankruptcy and you want to understand what might have happened or what still might happen in the future, you need to know what these words mean.
For the most part, the word “foreclosure” is only used when talking about real estate. We usually think of it as referring to your home, but it could be any land with or without buildings on that land. It could be an apartment complex or a rental house or commercial space or farm land or even a vacant lot. Regarding real estate, the repossession process is called “foreclosure.”
When a creditor exercises its lien rights by taking property other than real estate away from you for non-payment, it is called “repossession.” We usually think of cars when we think of repossession, and that is the most common type of repossession. But the term can also apply to furniture, appliances, electronics, and anything else that you may have used as collateral. Cars are repossessed more often because they are more valuable and because they are often out in the open where they can easily be repossessed.
A lien is a specific claim or right granted against certain property of the debtor. It is a legal claim or right against property owned by the debtor. If the debtor sells or refinances property that has a lien attached to it, the creditor must be paid out of the proceeds. Liens are usually attached to property that often changes hands or is refinanced such as a car or mobile home. Interest continues to run on the debt that gave rise to the lien after bankruptcy, but often at a lower interest rate set by the court by agreement.
A bankruptcy filing stops a previously-scheduled foreclosure and prevents property from being repossessed. While the bankruptcy is active, in order to foreclose on real estate or repossess property (such as a vehicle), the creditor must get permission from the bankruptcy judge. Filing bankruptcy can also create a process for saving assets where you are behind on payments. Some kinds of liens can be removed through the bankruptcy process, though it requires additional actions beyond just filing bankruptcy.
Please contact Pepper and Nason by calling us (304) 346-0361 today to find help in dealing with foreclosures, liens and repossessions.