As many of us have come to realize, financial situations change quickly. After buying an item on credit, we may come on hard times and have trouble paying off the loan. 

If you’ve missed payments on a property you have as collateral, the lender could try to repossess it. Find out what to expect and what your options are. 

Home foreclosures

When a homeowner misses mortgage payments on his or her home, the bank can legally try to retake the home and sell it to pay off the loan. 

But this is not the lender’s only option. In fact, for many lenders, foreclosure is a last resort. They would often rather work out a payment plan that allows the homeowner to pay off the loan while remaining in their home. 

If the bank decides to pursue foreclosure and eviction, the lender must provide a notice of default, give the homeowner proper notice, and get an order from a judge. 

The bank may also be required to provide loss mitigation opportunities, such as a loan modification or repayment plan. 

Cars and other items

Cars and other items used as collateral in a loan have fewer legal protections than homes. If you miss a payment, the lender can legally repossess the item without getting an order from a judge. They can keep the item or sell it to pay off your loans.

In Texas, lenders can take your property away without giving you advance notice. Sometimes they do it in the middle of the night or while you’re at work.

They can’t, however, “breach the peace.” That means they can’t use or threaten to use physical force to take back the item.

Preventing repossession

The best way to prevent foreclosure is to talk with your lender. They may be willing to work out a payment plan with you.

If that isn’t an option, consider speaking with an attorney about bankruptcy. Filing for bankruptcy will likely delay repossession, and you may even be able to save your property. 
If you have questions about bankruptcy, read our Bankruptcy Q&A. If creditors have been harassing you, check state and federal laws regarding debt collection, and read our blog here about what is ‘fair’ for debt collectors to do. As always, feel free to call us at 361-578-7200 to discuss your options. You may also text Leslie at 361-648-6888 seven days a week.