Repossession meaning: all you need to know about repossession

Posted on 19 August 2023

Written by Alan Spergel

In the world of personal finance, debts, and property ownership, the term ‘repossession’ is an important topic, and can create images of financial difficulty. In Canada, along with many other countries, repossession is the legal process of the seizure of property or assets by a lender, creditor, or collection agency. In the vast majority of cases, this is because the borrower has failed to meet their financial obligations. Often this is a failure to repay their debts on time or in full following a number of warnings. Understanding repossession and when it may be permitted is important for both lenders and borrowers given the legal, financial, and emotional implications it invokes. In this article, we explore repossession meaning, when it is prompted, and what you can do if you are facing repossession.

Repossession meaning: what is repossession in Canada?

Repossession is the action taken by a lender or creditor when they take back ownership of property or an asset that was used as collateral for a loan when the borrower fails to make the required payments. The process of repossession is usually carried out when the borrower is consistently behind on payments, breaches the terms of the loan agreement, or defaults on the loan. They may also be poor at communication, failing to provide transparent communication about their financial circumstances or the reason for having difficulty making the payments owed. The asset being repossessed could be a vehicle, real estate, equipment, or any other valuable property. Repossession in Canada is subject to strict legal regulations aimed at protecting both borrowers and lenders. These regulations are typically outlined in the Personal Property Security Act (PPSA) or similar legislation specific to each province or territory. The PPSA establishes rules for securing interests in personal property, including procedures for repossession, notifications, and disposal of repossessed assets.

What are the different types of repossession?

There are two primary forms of repossession in Canada:

Voluntary repossession

Voluntary repossession occurs when a borrower realizes they can no longer afford the asset and voluntarily returns it to the lender or creditor. While this doesn’t absolve the borrower from their financial obligations, it can potentially minimize some of the legal and financial consequences.

Involuntary repossession

In this scenario, the lender or creditor initiates the repossession process due to the borrower’s failure to make payments as agreed upon. This typically involves serving notices and following the legal process to regain possession of the asset.

What is the process of repossession?

The repossession process in Canada generally follows these steps:

  1. Notice – the lender provides the borrower with a notice of default, informing them of the missed payments and the impending repossession process.
  2. Chance to remedy – the borrower is often given an opportunity to catch up on missed payments and rectify the situation to avoid repossession
  3. Repossession – if the borrower does not take action to rectify the situation, the lender can proceed with the repossession, adhering to legal regulations regarding entry, time, and notice.
  4. Disposition – once the asset is repossessed, the lender must stick to specific rules regarding its sale or disposition. The proceeds from the sale are typically used to cover the outstanding debt, with any additional funds left over returned to the borrower.

What is the impact of repossession on your credit score?

Repossession is certainly not one of the easiest situations for anyone to go through. As well as facing the financial challenges of not being able to pay your debts on time, it can be heart wrenching to have your assets, property, or possessions taken away from you, often at short notice. It often has a negative impact on your credit score too, making it difficult to secure future loans or credit on favourable terms, with a reasonable interest rate or extended repayment period. On top of this, the loss of any asset due to repossession can be extremely distressing and cause further inconvenience to the individual facing repossession. At Spergel, we approach every individual we meet with compassion and understanding. We can help you to achieve debt relief, no matter how bad you might feel your situation is. We can also help you to fix a bad credit score and rebuilding your credit. It is important to remember also that lenders will only resort to repossession in a last ditch attempt to recover the outstanding debt they are owed. They will not want to take this option, and it can incur costs.

Struggling to get your head around repossession meaning? If you are worried about having your assets or property repossessed, it is important to act quickly. Book a free consultation with one of our experienced Licensed Insolvency Trustees at Spergel, and we can review your financial circumstances and help you to navigate the process of avoiding repossession. Reach out today – you owe it to yourself.

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Alan Spergel

Alan Spergel

Alan Spergel is the founder and President of Spergel. A leader in our industry, he is also a former chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and has served on Canada's Superintendent of Bankruptcy Management Board. He actively supports multiple charities, ensuring that Spergel gives back to our communities and has recently been appointed as Chairman of the Board of the Humber River Hospital Foundation. Outside of the boardroom, you can find Alan playing golf, tennis, or skiing and enjoying quality time with his grandchildren.

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