What Is Repossession? Understanding the Process from the Lender's Perspective

What Is Repossession? Understanding the Process from the Lender's Perspective

When a borrower fails to meet their payment obligations on a secured loan, like an auto loan or a financed boat, the lender can legally reclaim the asset. This process is called repossession, and it is a tool that allows lenders to recover or prevent financial losses associated with non-performing loans. Understanding the repossession process from the lender's perspective is essential for both financial institutions and borrowers, as it highlights the importance of maintaining communication and fulfilling obligations.

 

What Can Be Repossessed?

In BC, repossession generally applies to assets that serve as collateral for a secured debt. As in many other provinces, cars are the most commonly repossessed items in BC, but the legal process can be used to help lenders retrieve various other items, including boats, RVs, trailers, trucks and even heavy equipment.

When it comes to real estate, it is important to note that homes and other properties are treated differently. If the borrower defaults, the lender can start a process called foreclosure, which involves applying to the BC Supreme Court. If successful, the lender may be allowed to sell the property.

How the Repossession Process Works

The repossession process can be complex and varies depending on the type of asset and the specific agreements made between the lender and borrower. Here’s a breakdown of the typical steps involved in the repossession process:

1 - Default Is Declared

The repossession process begins when a borrower fails to make scheduled payments on a secured loan. This default can occur for various reasons, such as financial hardship or a lack of communication with the lender. Once a default is declared, the lender typically sends a notice to the borrower, indicating the missed payments and outlining the next steps. This notice serves as a final opportunity for the borrower to rectify the situation before further action is taken.

2 - Engage a Repossession Agency

If the borrower does not respond positively to the default notice, the lender can engage a repossession agency. These specialized companies have the expertise and resources to recover the asset efficiently and legally. The lender provides the agency with relevant details about the loan and the asset in question, enabling them to locate and retrieve the property.

3 - Voluntary vs. Involuntary Repossession

Repossession can occur in two forms: voluntary and involuntary.

·       Voluntary Repossession: This occurs when the borrower willingly returns the asset to the lender or repossession agency. This option is often less damaging to the borrower’s credit and can demonstrate a willingness to cooperate with the lender.

·       Involuntary Repossession: This is when the lender or repossession agency takes the asset without the borrower’s consent. This process typically involves a physical seizure of the property and can lead to additional fees and complications for the borrower.

4 - Notice of Sale

Once the asset has been repossessed, the lender is required to send a Notice of Sale to the borrower. This notice informs the borrower of the upcoming sale of the repossessed asset and provides details regarding the sale process. The lender must adhere to specific legal requirements regarding the notice period and the manner in which the sale is conducted. This is also a final chance for the borrower to pay the debt and reclaim the item before it is sold.

5 - Selling the Asset

If the borrower does not pay the debt, the lender may proceed with the sale process. The sale proceeds are used to cover the outstanding loan balance, including any fees associated with the repossession. If the sale price exceeds the loan balance, the borrower may receive the surplus; however, if the sale does not cover the amount owed, the borrower may still be responsible for the remaining debt.

Bailiff Services in British Columbia

If you are dealing with non-payment on a specific item, Canadian Bailiff Services Ltd is here to help. We assist lenders and financial institutions in navigating every stage of the repossession process in British Columbia. We can handle voluntary and involuntary repossessions, prepare legal notices and assist you with asset liquidation. With over 50 years of combined experience, our professionals can provide you with the assistance you need to recover your asset and safeguard your interests. Reach out to us.