Understanding the Repossession Laws in Pennsylvania

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Here at Cibik & Cataldo, we want our clients and those who need answers to their questions, to understand, in layman’s terms, what is going on in their lives. That’s why we work diligently to make what can be quite confusing as understandable as possible. The laws concerning repossession are exceptionally complicated in some cases. Don’t worry! We’re here to help you navigate through this difficult time. 

PA Laws Concerning Creditors and Repossession

If you owe money to a bank, finance enterprise, or a creditor, the credit entity likely has a security interest in some of your property. This security interest is called collateral.

Creditors’ Rights Involving Repossession

A creditor can repossess the personal property (collateral) if he or she does so peacefully. If a creditor arrives at your door to repossess your car, refrigerator, or any other item you have purchased on credit, you have the right to deny him or her access to the property. If a creditor attempts to come into your home or onto your yard, you have the right to tell the creditor he or she cannot do so. However, a lender does not need the owner’s permission to repossess a car that is parked on a public street outside of someone’s home.

If you have restricted the creditor from coming onto your home or yard to repossess the property, the creditor will be obliged to go to court and attempt to get the property back. This action will accrue more costs for the defendant (the party receiving the complaint). The plaintiff is the person bringing the charge against the party who is delinquent in paying.

Unless the defendant has signed a written security agreement that clarifies that repossession will occur if he or she does not pay, legal assistance must take place. If the creditor breaks any of these laws, the defendant has the right to sue the creditor in court.

Is a Warning that Property is in Danger of Being Repossessed Required?

Typically, no warning is necessary before repossession. There are, however, two situations that do require notice before repossession:

Non-Vehicle Personal Property

If you borrowed money to purchase personal property that is not a vehicle (i.e., furniture, outdoor equipment), the creditor must give you a 21-day notice before your property removed. This action provides buyers a chance to catch up with back payments.

Mobile Homes

A written 30-day notice from the creditor must appear before the creditor can repossess your mobile home. This notice gives buyers a chance to catch up with past payments. To further prevent repossession, the buyer must:

• Pay “back-payments.”
• Pay late charges
• Pay up to $50 for the creditor’s attorney fees
• Acquire insurance for the home (if the contract requires doing so)
• After 30 days, the buyer may have to pay court costs and attorney’s fees

Let’s Talk about Debt

Since we just mentioned the “written security agreement,” this is an excellent time to discuss the types of debt we see most often.

Unsecured Debt

This type of debt has no assets supporting the debt. It usually occurs in the areas of:

• Medical bills
• Credit Cards
• Old apartment leases, and more

Chapter 7 Cases

If you choose to take care of your debt by filing a Chapter 7 bankruptcy agreement, the trustee will gather and sell the debtor’s nonexempt assets and use the money to pay creditors. There is more to this choice that we are happy to assist you with by calling our office for a free consultation.

Chapter 13 Cases

This type of bankruptcy move is known as a “wage earner’s plan.” It allows an individual with a regular income to create a plan for repaying all or part of the debts. This step is also quite complicated, and you will need assistance to follow all the “legalese.”

Secured Debts

Secured debts that occur most often are for vehicles and houses. In these cases, the buyers put up some form of collateral. During the bankruptcy process, the automatic stay will keep creditors from taking the property. After the bankruptcy, you will have to reaffirm the debt to keep your house or vehicle. If you do not, the bank has the authority to keep your property.

No Discharge Debts

These debts include:

• Student loans
• Debts obtained fraudulently
• Child support debts
• Financial obligations related to a criminal case
• Some types of IRS debts fall into this category

We want to share with you all we know about repossession. Still, in practically every case, a knowledgeable and experienced attorney will need to be by your side as you navigate what can become something of a maze. 

Tips for Avoiding Repossession

As upsetting as repossession can be, it gives you a chance to reassess how you spend your money and how to stay out of debt. This action can be accomplished by:

1. Doing all you can to avoid getting in over your head financially
2. Determining that you make enough each month, even if your salary decreases somewhat, to handle the payments on your vehicle or house
3. Paying attention to the interest rate on your loan
4. Letting the creditor know if or when you hit a rocky place with your budget (Creditors are humans. He or she may find a way to give you an extension of time for payment or possibly refinance the entire loan.)
5. Remember, you will also need enough income to keep up maintenance and repair costs that you must pay regularly.

Contact Cibik & Cataldo

If you are facing foreclosure, bankruptcy, or repossession,  Michael A. Cibik and Michael A. Cataldohave filed over 20,000 personal bankruptcy documents during their 35 of practicing law. When you are looking for legal help in the bankruptcy arena, Cibik & Cataldo offer compassionate and respectful guidance to assist you with what may seem to be problems with no solutions.

If you need assistance and you live in and around Philadelphia, contact the law offices of Cibik and Cataldo today for a free consultation. It’s time to find your way back to financial freedom.

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Cibik & Cataldo
1500 Walnut St Suite 900
Philadelphia, PA 19102
(215) 735-1060
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Should You Reaffirm Your Mortgage When Filing for Bankruptcy?

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If you choose to file for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code, one option you may be urged to consider is signing a “reaffirmation” of your obligation to make mortgage payments. You should not make that decision without the advice of your attorney.

Each year, about three-quarters of a million Americans, file under Chapter 7 seeking a fresh financial start and relief from creditor demands. Therefore, it is worth understanding “reaffirmation.” It is an agreement that you can sign—if you choose to do so–during a bankruptcy proceeding. In the reaffirmation, you agree: 

1. That you realize that a successful bankruptcy “discharge” will free you from the obligation to make payments on your home mortgage, and
2. That you hereby “reaffirm” your legal obligation to make those payments.

On the face of it, that seems a silly thing to do.  If you win bankruptcy relief from your obligation to make your mortgage payments, why turn right around and “reaffirm” that obligation?  Well, your creditor (the bank or other lending institution holding your mortgage) would like you to do so. But why should you agree?

Choosing Chapter 7

Some background on Chapter 7 may help to clarify the context in which the “reaffirmation” option arises.

Broadly speaking, Chapter 7 is one of two ways that personal bankruptcy works. Under Chapter 7, you liquidate “all” your remaining assets—but with some “exemptions” or exceptions—to pay as much as possible of what you owe your creditors. Under Chapter 13 of the Bankruptcy Code, you set up an agreed repayment plan, “scheduling” your debt payments to be manageable over time given your expected income.

Almost 70 percent of consumer bankruptcy petitions (or filings) in the federal courts are under Chapter 7. The other 30 percent are under Chapter 13. The overwhelming majority of both types of filings are categorized as “non-business; that is, they mainly involve consumer debt.

The apparent preference of consumers for Chapter 7 may be explained by the speed of the debt relief. You can obtain such relief much more quickly under Chapter 7. By contrast, a Chapter 13 repayment plan can last up to five years.

(By the way, you probably have heard, as well, of Chapter 11 filings.  Corporations, partnerships, and sole proprietorships that desire to remain in business, avoiding liquidation while they go through “reorganization,” often choose Chapter 11.)

If you do consider a Chapter 7 bankruptcy filing, you should be aware that your petition is not automatically accepted for action by the court. There are certain qualifications that you, the debtor, must meet. Also, you are required to have a trustee assigned to your case; pay various court charges; and provide financial statements such as income-and-expense reports, copies of tax returns, and a list of all property—among other things.

It is imperative to have the assistance of a qualified lawyer as soon as you start considering the possibility of filing for bankruptcy. By the time you actually make a court filing (if that turns out to be your choice), you will have taken many preliminary steps with your lawyer’s advice.

If you are asked to sign a “reaffirmation”

If you are a homeowner filing Chapter 7 (or a husband and wife filing jointly), and “all” your assets are turned over to be liquidated to pay some part of what you owe, your home is not included. It is exempt.

Furthermore, if the court “discharges” you (your filing is successful), you have no obligation to make any more payments on your mortgage.

Does that sound too good to be true? It is. When you arranged for your mortgage with the bank, you entered into not one but two agreements. You signed a promissory note that you would make the scheduled payments on the mortgage loan (home loan). And you agreed to a “lien” on your home, which became the bank’s security in case you defaulted on your payments on the promissory note.

With your successful bankruptcy, the promissory note, per the court, no longer binds you. But the lien is not canceled. Therefore, if you no longer make payments on the mortgage loan, the bank will have recourse to selling your home to pay the mortgage loan.

It often is said that filing under Chapter 13 can “enable you to keep your home.” That means only that if your debt payments are stretched out in a five-year repayment plan, you might thereby be able to make payments to the bank and keep your home.

But under Chapter 7, you also can keep your home. You can keep it if you make your mortgage payments. In order to make those payments, you certainly do not have to sign the “reaffirmation” of your promissory note. You just keep making the payments, when due, but you are not legally obligated to do so. You are doing so because wish to keep your home.

That is why many attorneys wonder why people would want to sign a “reaffirmation.” They can keep making payments on their home if they are able. In addition, they seem to have a definite advantage under one scenario.

If the bank does end up selling your home, and if the sale does not yield all the money required to pay your entire mortgage, the bank would like you to make up the difference. If you and your bank have entered into the “reaffirmation” agreement, then the bank has a legal basis for this: You reaffirmed your promissory note.

If you did not sign the reaffirmation, the bank has no basis for collecting from you the balance of the mortgage not covered by the sale of your home.

This means–to repeat what we said at the outset–there is at least one obvious reason to refuse to sign a reaffirmation. And, finally, be aware that acceptance of your reaffirmation agreement by the court is not automatic. Most judges will ask some tough questions about why you are reaffirming. And some judges don’t sign reaffirmations at all because you don’t need one to keep making your mortgage loan payments.

A reaffirmation is a decision, like many you will face if you elect Chapter 7, to be made only after discussion with your attorney. And, by the way, a reaffirmation, if you decide to make one, can be approved by the judge only at the time you make your court filing. It cannot be approved when your bankruptcy is discharged. Therefore, an affirmation is one of many issues you and your lawyer must discuss as early as possible.

Cibik & Cataldo Can Help

As Philadelphia bankruptcy lawyers, Cibik & Cataldo, P.C. has 35 years of experience providing legal services to thousands of clients in the Philadephia area. We have done so with a strong value orientation and with compassion and respect for clients. Michael A. Cibik, Esq. and Michael A. Cataldo, Esq. are both certified by the American Bankruptcy Certification Board, which means that you have an objective standard of excellence and reliability when you make your choice of legal counsel in financial and bankruptcy matters.

Check back here regularly for information, insights, and updates on all legal aspects of financial and bankruptcy matters.

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Cibik & Cataldo
1500 Walnut St Suite 900
Philadelphia, PA 19102
(215) 735-1060
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