Definition
A repossession is a seizure of collateral that was used to guarantee a secured loan. Repossession may also refer to seizure of leased property.
Analysis
Repossession of a vehicle used to secure a loan is the most common type of repossession. In many cases, the borrower falls behind on payments and fails to cure the delinquency to the satisfaction of the lender.
Repossession may be voluntary, meaning that the borrower turns over keys to the vehicle to the lender. Repossession may also be involuntary, in which an agent of the lender (Repo Man) seizes the vehicle without the direct knowledge or consent of the borrower.
Repossession is equally detrimental to credit scores whether the act is voluntary or involuntary. There is no distinction made on a credit report.
Repossession can result in an auction sale in which the proceeds are used to partially repay the loan balance. The remainder of the balance, including repossession fees, storage fees, auction fees and legal fees may still be pursued by the lender from the borrower.
Repossession of real estate is subject to a different, more complicated set of requirements. This process is known as foreclosure.
