Repossession of property is the process by which a creditor recovers possession of the property when the debtor defaults on the debt by failing to make the required installment payments on time. Repossession is often used by a creditor who has extended credit to a debtor for the purchase of personal property, such as a motor vehicle, boat, machinery, equipment, tools, artwork, jewelry, or rent-to-own furniture or electronics.
The creditor’s right to repossess the property usually comes from the credit financing agreement the debtor signs when purchasing or renting-to-own the property.
Laws governing creditor and debtor rights and obligations—including the right to repossess property—vary from state to state and are usually located in a state’s statutes—often in the state’s adopted or enacted version of Article 9 of the Uniform Commercial Code, governing secured transactions.
In Texas, repossession of property is governed by the state's version of Article 9 of the Uniform Commercial Code (UCC), which regulates secured transactions. When a debtor defaults on a secured loan by failing to make timely payments, the creditor has the right to repossess the collateral, such as vehicles, boats, or other personal property, without judicial process if it can be done without breach of the peace. The credit agreement signed by the debtor typically includes a security interest that gives the creditor the right to repossess the property upon default. Texas law requires that the repossession be conducted in a peaceful manner, and the creditor may not use force or disturb the peace during the process. After repossession, the creditor must provide the debtor with a written notice of their rights, including the right to redeem the property and the intention to sell the property if the debt is not settled. If the property is sold, the debtor may be liable for any deficiency if the sale proceeds are less than the outstanding debt.
