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Auto repossessions down; is it a temporary lull? P.2

In the last entry, this blog opened a discussion into a recent downturn in auto repossessions. Despite the current drop in repossessions, the president of an Ohio-based auto auction and repossession company says that repo companies are under pressure to make ends meet. Some have gone out of business, but those that remain continue to lower profit margins to remain in business. But, for a consumer, an auto loan is a debt taken on to secure transportation.

Generally, an auto loan is a secured transaction--meaning that the lender may decide to repossess an auto if the borrower falls into default. The auto is collateral that "secures" the loan. Under Ohio law, the lender does not have to give notice of a potential repo, but the bank may not breach the peace to take back the car.

Obviously, a repossession can cause non-financial problems for the car owner. If, for instance, the bank later sells the car at auction, the lender may decide to seek a deficiency judgment on the difference between the sales prices of the repossessed car and the outstanding balance on the loan.

Some consumers are finding cash to reclaim repossessed vehicles. However, many Ohio residents may have other financial struggles that stand in the way of generating sufficient cash to reclaim a repossessed car.

Generally, filing for bankruptcy will stop a repossession for struggling debtors in Ohio. In some cases, a person may be able to retain a vehicle through filing for bankruptcy relief. A person generally would still need to get current, and keep current, on the secured auto loan payments--each case is dependent upon various factors. But in a chapter 13 bankruptcy, a debtor may be able to cure a default over time.

Source: The News Journal, "It's hard out there now for a repo man," Chris Woodyard--USA Today, Feb. 22, 2013

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