How to Avoid a Repossession

Repossession is something we all want to avoid. When financial circumstances get tight, it's natural to worry about the possibility of having your property taken away from you because of your failure to make payments on it. Naturally, if your car is repossessed, you can't go to work, in which case your house may get repossessed, since you aren't earning money to make payments on it. Thankfully, no matter how bad your money situation may be, there are ways to avoid a repossession.

Instructions

1. Make sure you stay in constant contact with your creditors. If they hear nothing from you and you get behind on payments, creditors will assume you have no intention of paying, and will move forward with repossession. Let them know of your situation and give them an idea of when payment can be expected.

2. Try to negotiate new payment terms. Many lenders are willing to work with you if you're in financial straits. You could ask for a reduced monthly payment or interest rate, a payment forebearance or request that your missed payments be placed at the end of your loan. Whether your lender is willing to work with you will depend a lot on your previous payment history and credit rating.

3. Sell the item that's in danger of being repossessed. You won't have the item anymore, but you'll avoid getting a repossession placed on your credit report. If you make enough money, you could buy a cheaper replacement item.

4. Rent out your property. This is a particularly effective way to avoid repossession on a house, but will also work for a car. You'll get regular monthly payments that will allow you to continue paying on the loan until it's either paid off or you have the money to resume payments on your own.

5. Declare bankruptcy as a last resort. Since a car or house loan is secured, you won't be able to wipe out the debt entirely, but you could arrange a reasonable repayment schedule through a Chapter 13 bankruptcy. A Chapter 7 bankruptcy will keep your creditors at bay until the bankruptcy is discharged, giving you time to get on your feet financially.

Tips & Warnings

• If your house is facing repossession, watch out for foreclosure rescue scams. There are lots of unscrupulous companies out there who promise to save your home by buying it from you at cost, and then renting it out to you until you're back on your feet enough to buy it back. However, in many cases, these companies raise the rent so high you can't afford it, or they decide not to rent to you after all, leaving you out on the street. Sometimes, they offer to negotiate with your mortgage company for you for a high fee, when this is something you can do on your own. Save your money and stay away from these scam artists.