Creditors who issue loans in California secured by tangible property largely have the right of repossession if the debtor fails to pay the loan according to the terms of the loan contract. The contract essentially grants the creditor an ownership interest in the tangible property established as security for the loan. As an entity with an ownership interest, the loan contract enables seizure of the secured property typically without a court order because both parties have already agreed to this as a consequence of nonpayment.
Multiple kinds of tangible items might secure loans and therefore be subject to repossession by creditors. These include:
- Vehicles
- Rent-to-own furniture and electronics
- Art
- Real estate, although the foreclosure process governs the repossession of real estate.
A delinquent loan balance allows a creditor to hire a third-party repossession service to collect the secured property. The service then arranges for the sale of the repossessed item so that the creditor may recover funds.
Starting the repossession process
Although creditors and their agents have broad rights to reclaim items securing a loan, they must avoid entering private property. They cannot enter closed garages or fenced areas to seize something. However, a property owner may give permission to enter these areas to complete a repossession action. A vehicle parked in an open driveway or on the street can be collected legally.
Before initiating repossession, a creditor may discuss with an attorney how to proceed with consumer debt collection. The law might require giving the debtor notice of the upcoming action. Legal guidance may also be needed in cases when the debtor is hiding secured property, which could be illegal. In some situations, the representation of an attorney might potentially lead to a settlement of the debt without forcing a creditor to resort to repossession.