Bankruptcy Law: Repossession Vs. Charge Off
Attention, everyone! Repossession and charge off are NOT the same thing. Far from it, in fact. And while both can occur when you have a debt in a bankruptcy, that’s just about where the similarities end. Read on to learn more about these two hot topics in bankruptcy.
What is a repossession?
When you take out a loan, you often put up a possession for collateral. Let’s use your car as an example. When you borrow money to purchase a car, the car is the collateral. That means that if, for whatever reason, you default on your payment, the lender can take your car from you, sell it, and use the money they get to go toward what you owe. This is called a repossession.
Sometimes a repossession isn’t enough to settle the debt. If there is a remainder owed after the sale of the collateral is applied to the debt, this is called a “deficiency balance” and it still needs to be paid.
When a car or other belonging is repossessed in Michigan, the repossession company hired by the lender will give you a deadline by which you can pay your debt in full to get the item back and avoid its sale.
What is a charge off?
Unlike a repossession, a charge off is more of an accounting term than something that happens to your or your property. If a debt is marked as a charge off, it simply means that it is no longer in the hands of the original lender. This is because they have transferred or sold it to a collection agency. This means it is now the collection agency’s right to collect the debt instead of the lenders.
The impact on you is minimal — you still owe the money regardless of who you owe it to.
Don’t mistake “charge off” as a notation that you do not owe the money anymore. If you make this mistake and fail to include the debt in your bankruptcy paperwork, it cannot be discharged.
I am facing bankruptcy. Who can help me?
If you are facing bankruptcy, it is important to partner with an experienced bankruptcy attorney. The team at Maxwell Dunn PLC is ready to help you. We are committed to helping you overcome your financial challenges and avoid future financial hurdles. To get started, contact us at (248) 936-6390.See all videos