A promissory note is an agreement you sign when you purchase property using a loan, such as a car, furniture or electronics. The promissory note is an agreement to make payments on the the item purchased, and that the creditor has the right to recover the property if you default on the loan. Texas law permits repossession of collateral upon default of a signed promissory note.
No Waiting Period
Texas law does not establish a waiting period for repossession of collateral after default on a promissory note. The borrower is in default the day after he misses a payment. However, most lenders choose not to repossess collateral immediately after a missed payment. Repossessing collateral is expensive, and reselling the property typically results in a financial loss -- although you may file suit against the borrower for your repossession and resale costs, you may never recover these costs if the borrower lacks the funds to pay you.
No Notice Requirement
Once you determine that repossessing collateral securing a defaulted promissory note is the appropriate choice, you may repossess the property immediately. Texas law does not require you to give the borrower notice before repossessing the property. Giving the borrower notice gives the borrower an opportunity to hide the property -- although this act constitutes a crime under the Texas Penal Code, borrowers may use this strategy to delay or prevent repossession.
Method of Repossession
Texas law does not dictate the manner for the repossession of collateral. It only specifies that repossession activity must not constitute a breach of peace. You cannot engage in physical contact with the borrower to obtain access to collateral. Also, entering the borrowers property, which includes a garage, shed or other storage area, without the borrower's permission constitutes a breach of peace.
Notice After Repossession
In Texas, you may sell the property after repossession to recover your loss. However, if you plan to sell the property at a public auction, you must give the borrower written notice at least 10 days before the sale. The notice must contain the time, date and location of the sale. The notice gives the borrower the opportunity to regain possession of the collateral by paying the full balance due, along with repossession, storage and other related costs.
0 comments:
Post a Comment