It can happen to anyone. Loss of a job, an illness, a death or any other loss of income can cause Florida residents to experience a repossession. While it can be embarrassing for someone to have a car, home, boat or other property repossessed, a main concern is likely what it will do to one’s credit. What exactly does repossession do to a person’s credit score and finances?
Repossession is the term given to describe what happens when a lender or creditor collects collateral from a loan that has not been paid. Once a borrower gets far enough behind on payments, the collateral upon which the loan was granted can be seized by the lender. There are different types of repossessions, such as car repossession, home foreclosure and others. It is seen as a derogatory mark on credit, even in cases of voluntary surrender.
When collateral is repossessed, the creditor can go after the debtor in court for any remaining balance owed. The derogatory mark left on the person’s credit report can stay for up to seven years, which can adversely affect one’s credit score. In most cases, it can become difficult, if not impossible, to refinance any loans or be granted new credit as long as that mark is on the person’s report. Some jobs even run a credit check before hiring.
While it won’t keep the mark off of a person’s credit report, a voluntary surrender of collateral can help reduce the severity of the repossession. The debtor can also choose to try and reclaim or repurchase the collateral. As long as the payments are made on time, the mark will be removed from the person’s credit report. An attorney can help determine whether this is possible in the debtor’s state.
In any state, including Florida, it is important to note that there are steps that can be taken to keep a lender from repossessing certain property. A bankruptcy lawyer, for example, can help advise a client on how to use bankruptcy law to stop a foreclosure. While repossession is typically a bad experience, a knowledgeable lawyer can help a debtor to get back on track and, when appropriate, remove any derogatory marks from his or her credit report.
Source: huffingtonpost.com, “How Repossession Impacts Your Credit“, Michael Osakwe, March 17, 2017