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Yesterday, I watched an episode of a TV show where debt collectors stole valuable assets because their owners didn't pay the monthly rates or when they entered bankruptcy.

The show was recorded in the US, and I wonder how this could be legal, as the actors seem to be from a private entity which offers their service to banks and other creditors. It didn't seem the actors were trying to first politely ask for the items or even talk to the debtor. How would the items still legally become the property of the creditor or "thief" after what looks like theft? If I understood correctly, the contracts for the collectors were offered by the banks, not some government entity or court.

In Germany, if somebody cannot pay back his debt, a government official is appointed the task of collecting luxury assets the debtor may still own, but only after a court decision and only after a reasonable timespan for the debtor to either pay the bill or hand over the assets voluntarily.

In yesterday's show, they seized an airplane whose installments weren't paid anymore, as well as a yacht and a Ferrari of some guy that had made a fortune on cryptocurrency but then lost everything and went bankrupt.

terdon
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PMF
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    Operation Repo? Those are fictionalized repossession cases, e.g. made much more TV-esque than they really were. Or Repossessed!? – Trish Jan 17 '24 at 13:45
  • @Trish I don't remember the name of the show, I'll check that. It was on german channel "DMAX", and yes they wrote that they made up some parts of it (and they probably altered names and locations), but in this case I think the general plot isn't fictious. – PMF Jan 17 '24 at 15:11
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    @Trish the show airs in Germany as "Airplane repo - Die Inkasso-Piloten". Not sure whether that matches the original title. "Inkasso" means debt collection. – PMF Jan 17 '24 at 22:08
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    That's https://www.imdb.com/title/tt1808720/ - https://en.wikipedia.org/wiki/Airplane_Repo - probably equally fictionalized. – Trish Jan 17 '24 at 22:10
  • Sorry to have noticed and how is any of that fair?

    Until you can explain otherwise, stealing remains stealing and has nothing to do with TV shows or anything else.

    With a warrant, you can grab what the warrant specifies.

    Without a warrant, grabbing anything amounts at best to illegal destraint

     – Robbie Goodwin Jan 23 '24 at 22:26

4 Answers4

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Security

Many jurisdictions have the concept of a "secured" debt. Examples are Article 9 of the Uniform Commercial Code in the United States and the provincial Personal Property Security Acts in Canada.

When someone has a perfected security interest in debtor property, it places that creditor ahead in line of other creditors in bankruptcy or execution against such property. It also gives the secured creditor special rights of seizure.

Examples

Secured loans are common. One primary example is what is known as a purchase-money security interest, where someone takes out a loan to purchase the very same thing that the parties agree will be security for the loan. If the debtor doesn't pay the loan on the terms, the creditor can take the thing.

It is also common for a person to provide personal property (like a yacht) as security for a loan in relation to a business dealing.

Right of seizure

Where a debt is "secured" and the security interest "perfected," then upon default, the creditor may seize the security (see e.g. s. 58 of British Columbia's PPSA; or §9-609 of the UCC). This is a right flowing from the agreement made between the parties, and from the statutory scheme. It does not generally require the additional step of obtaining a court order (although the specifics may vary by jurisdiction, sometimes involving more process for consumer goods).

Comparison to unsecured debt

For unsecured debt, yes, a court order would have to be first obtained for a writ of execution against personal property and then would be seized by (or at least under the supervision of) a court bailiff.

Jen
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  • So a possible scenario would be that the owner of the Ferrari was previously asked by the debtor (and a court) to hand it over but just didn't show up? If the story is true, the debtor was owing several millions of bucks to various deptors but still drove that Ferrari and an expensive Yacht. – PMF Jan 17 '24 at 15:26
  • Ok, understood. To me it looks like in this case it's really about unsecured debt, as the assets where (presumably) fully paid before. The owner used to be millionaire, after all, and the debts weren't directly related to these items, but to his failing business. – PMF Jan 17 '24 at 15:46
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    FWIW, the court bailiff usually just stands there and looks scary and makes sure everyone behaves while the actual physical seizing is usually done by some day laborer hired by the creditor. – ohwilleke Jan 17 '24 at 16:35
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    "The owner used to be millionaire, after all" Some millionaires are "millionaires" via the technique of buying a lot of luxury goods on credit, then using their apparent prosperity as a tool to court investors. If things go off the rails they typically do not quietly hand the stuff back to the debt holder but drag things out until they absolutely have to skip town or go to jail. – Charles E. Grant Jan 17 '24 at 18:19
  • @CharlesE.Grant how do they get away with not showing their financial statements to their investors? – user253751 Jan 17 '24 at 19:58
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    @PMF It seems like you're misusing the word "debtor." The debtor is the person who owes money. The people to whom money is owed are called "creditors." – A. R. Jan 17 '24 at 20:52
  • @user253751 The business entity is usually separate from the entrepreneur who owns the financed luxury goods. The business may be brand new with no debt, while the entrepreneur is on the brink of default. Investors need to know the business's financial details but wouldn't normally ask to see personal financial statements for things like cars and yachts, although they may be impressed by them for better or worse. – Tashus Jan 17 '24 at 21:08
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    @user253751 "how do they get away with not showing their financial statements to their investors?" Pish, tush, financial statements are so last century. We invest on vibe now, and the charisma of the founder. Seriously, did you follow the FTX debacle? Major venture capital firms invested hundreds of millions of dollars on the basis of "trust me bro, this is huge", crazy hair, and rude behavior that they thought they could market as a tech genius founder with Aspergers. I'd ask for statements, but look up financial fraud stories in your local paper and see that some folks don't. – Charles E. Grant Jan 17 '24 at 21:54
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    @CharlesE.Grant Or move into the White House. – Barmar Jan 18 '24 at 15:31
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    @CharlesE.Grant: The kind of investing you describe is a low interest rate phenomenon. The idea is that investors have a huge pile of money burning a hole in their figurative pockets, and are desperately trying to generate alpha so that they can turn a meaningful profit. This leads to seemingly-illogical behavior, such as buying anything that might have a positive expected value. When you have higher interest rates like we do today, a lot of those investments suddenly look much less attractive compared to e.g. index funds and bonds. – Kevin Jan 18 '24 at 22:10
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    @CharlesE.Grant As opposed to Kaiser taking the last of his cash, buying a fancy new car, driving that to the bank and using that to out an unsecured loan so he could make payroll? "Last century" indeed... – fectin Jan 19 '24 at 00:37
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    I'm pretty sure that, at least in some places in the USA, a creditor can sell a secured loan. A bank can loan you money for a car as a secured loan with the car as the collateral. If you default, then the bank may sell the secured loan to a collection company for ~50% of what it's worth, and then the collection company will come to collect the car, and then sell it. Then the banks don't have to deal with that particular bureaucracy. – Mooing Duck Jan 19 '24 at 00:44
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It depends. A leased car is not your property, it is the property of the leasing company. So in the right circumstances the leasing company will have the right to take the car back. They can hire a company to take it, and since it happens with permission of the owner, it is not theft.

In case of bankruptcy, you usually owe money to two or more parties. If the car that you own is your only item of value, worth say $20,000, and you owe two parties $20,000 each, then it should be sold and each party should receive $10,000. If one party takes your car and sells it for $20,000 and keeps the money, the other party will obviously get nothing. The second party can take the first party to court to get their $10,000.

gnasher729
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    That's clear so far, but it does not answer the question why this needs some seemingly illegal action to take the car. Wouldn't it still at least need a court decision that the car can be taken? In the mentioned cases, the assets also are properly owned and likely registered by the owner, as he did have the money to buy them previously. Just posessing the keys of a car registered to someone else doesn't make you the legal owner. – PMF Jan 17 '24 at 12:52
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    In case of a leased car, the leasing company is the owner. You will have signed a contract that says clearly under which conditions they can take the car away. And yes, if you are the owner of the car the situation would be different. – gnasher729 Jan 17 '24 at 13:04
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    @PMF That is called REpossession, where Re is latin and means literally "back". Repossession means "getting back into possession of your property" – Trish Jan 17 '24 at 13:40
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    This also applies even if the car is financed rather than leased. Part of the loan paperwork will spell out that the car can be reclaimed and sold to offset the debt. If the car is sold for less than the outstanding debt, then they can still come after the borrower for the remaining balance. – Michael Richardson Jan 17 '24 at 20:38
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    @PMF "why this needs some seemingly illegal action to take the car." What makes this seem illegal? "In the mentioned cases, the assets also are properly owned and likely registered by the owner, as he did have the money to buy them previously." What makes you so certain? It's relatively easy to afford a down payment and a few monthly payments of an expensive car. Why do you assume they own them in full? – Tashus Jan 17 '24 at 20:59
  • In your second case, the police will seize the car from whoever bought it, and the 20000$. Charges of theft and handling of stolen goods will be brought forwards against the first creditor. Who will additionally get sued by the debtor and the other creditor, and the guy who bought the car, for their damages. – Karl Jan 18 '24 at 20:58
  • @Tashus If the car is parked in a driveway and I watch (a) a repo man manipulates the locks, gets into the car, drives off and (b) a genuine car thief does the exact same thing, then what I see is identical. So to me as a bystander they both seem illegal, I call the police in both cases. If police tries to arrest the repo man he shows his paperwork and they let him go. – gnasher729 Jan 31 '24 at 05:06
  • @gnasher729 I agree with your comment w.r.t. a bystander, but OP seems to be saying "I believe this action to be illegal, even though I know the context" rather than "this action would appear illegal without knowing the context". The question reads to me as asking why are these repossessions happen illegally, rather than why their tactics give the impression of illegality. "How would the items still legally become the property of the creditor or 'thief' after what looks like theft?" – Tashus Jan 31 '24 at 15:39
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As is often the case with many questions about what is legal in the US, it depends on the state or territory. Here's a site that breaks it down by state. I know links can rot away but I'm not going to paste the entire content here. But here is a selection of excerpts:

Alaska The Alaskan state has a unique set of regulations when it comes to repossessions. Both the creditor and the debtor have rights that are protected by law during the repossession process. For instance, in Alaska, a creditor cannot change the locks or break into a debtor’s house without permission.

Moreover, repossession agents must provide written notice to debtors before attempting to repossess their property. They must also avoid breaching the peace during the repossession process by avoiding confrontations or using excessive force...

Delaware The State of Delaware imposes specific regulations regarding repossession. Lenders require a court’s permission to initiate the process, and they must inform the borrower of their intentions. Once approved, the vehicle can be taken, but only in a peaceful manner...

New Hampshire In New Hampshire, a repossession can be legally conducted as long as it is peaceful and without any breach of peace. The creditor is not required to provide notice before repossessing the vehicle, but once they do and the debtor voluntarily surrenders the vehicle, the creditor cannot charge any fees besides those agreed upon in the loan contract. Additionally, any personal property found in the vehicle must be returned to the debtor within five days...

New York The repossession regulations in the state of New York require lenders to obtain a court order before repossessing a vehicle. This is known as judicial foreclosure and provides some protection for borrowers. The court process can be lengthy, but it ensures that borrowers have a fair chance to defend their rights. Additionally, if a lender sells the repossessed vehicle, they must provide notice to the borrower and any co-signers before doing so. This allows them an opportunity to redeem the vehicle by paying the outstanding balance owed...

There's a lot more information in that page such as a section about common and uncommon laws that follows all the state sections.

JimmyJames
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    The New Hampshire law position is the default rule under Article 9 of the Uniform Commercial Code, a model statute which is enacted as state law in every U.S. state, territory, district, and commonwealth. But enacting jurisdictions are free to modify it as they wish, as the several states you have listed have done. The New Hampshire rule (except for the five day return of personal property rule), however, is the dominant majority rule. – ohwilleke Jan 17 '24 at 21:53
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    @ohwilleke I'm no expert on this topic (or the law.) I'm mainly trying to point out that you can't assume that the laws in one state you have visited or lived in are the same in every other state. That said, it's interesting that you call this the dominant majority rule (I'm assuming standard English, not legalese) because I picked that one specifically for being different than the others (no notification required) and it took me a while to find a state that didn't require prior notification of some form. – JimmyJames Jan 17 '24 at 22:29
  • I imagine that even in jurisdictions where notice isn't required, creditors will usually send several notices of delinquency before calling the repo men. The latter is more trouble, and there's no guarantee that they'll get what they're owed when they sell the item. Despite what you see on TV shows, I doubt that repossession is ever a real surprise. – Barmar Jan 18 '24 at 15:38
  • @Barmar I don't think repossession is a surprise but there are legal exceptions to trespass and breaking and entering related to this in various jurisdictions. You might know the repo person is coming but that doesn't mean you'll see them repossess it. In other words, they might send you notice and then sneak onto your property late at night to take 'your' vehicle. – JimmyJames Jan 18 '24 at 16:13
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    @Barmar I read a much more in-depth article about this but here's a good example of what I mean: Former repo man discusses safe practices "Former repo man Steve Andrews says the best time to pick up a vehicle is when the car owner is not home." – JimmyJames Jan 18 '24 at 16:16
  • @JimmyJames Of course. Even if they've been warned, that doesn't mean they won't fight back. – Barmar Jan 18 '24 at 16:22
  • @Barmar And I think this was what the OP was asking about. Is it legal to enter someone's property without permission and 'steal' their vehicle in a repossession. And the answer is, roughly, 'yes', depending on the jurisdiction. – JimmyJames Jan 18 '24 at 16:23
  • Yes. But legal doesn't imply safe, so the repossessor will try to avoid conflict. – Barmar Jan 18 '24 at 17:19
  • I'm not sure what any of this has to do with my original comment. I was just remarking on the fact that some jurisdictions doin't require notice, but the creditor will still try to get their money the easy way first. – Barmar Jan 18 '24 at 17:20
  • @Barmar Then I have no idea what your orignal comment has to do with my answer. Whether a "creditor will still try to get their money the easy way first" doesn't really have much to with what legal options exist. – JimmyJames Jan 18 '24 at 17:43
  • Your answer describes the differences in laws among states. I was pointing out that even when the law doesn't require the creditor to do something, they will usually do it anyway. – Barmar Jan 18 '24 at 17:50
  • @Barmar If someone asks "is it legal to break a bottle over your own head", pointing out that most people won't do that because it hurts is likely true but doesn't address the question in any meaningful way. – JimmyJames Jan 18 '24 at 18:02
  • For OP, note that TV shows are already playing fast and loose with the facts. They're very unlikely to be paying attention to the subtleties of the specific laws of the particular state the show is set in. – ojchase Jan 19 '24 at 16:03
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There is a subset of borrowers whom both fail to make their required payments and have no intention of returning the financed vehicle.

The financing company would like to recover their money in as speedily a manner as possible.

Resorting to the courts and its officers to make them whole can take a considerable period of time and can accrue considerable additional expenses.

Resorting, instead, to a "repo-man" who sneaks in with a spare key and "steals" back the vehicle takes much less time and expense. The borrower also has no legal recourse, as the financing documents spell out that the vehicle can be reclaimed and sold to service the debt.

The vehicle is not being "stolen", but the borrower may believe so and may react violently, so being a "repo-man" is not necessarily a safe profession.

Michael Richardson
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    FWIW, while the court process to repossess something under a court order does cost money, it is actually quite a fast process and typically takes a few days to a few weeks, not months or years like a typical lawsuit. An lawsuit to get court permission to recover tangible personal property was historically called a "replevin" action although the modern "plain English" terminology is a "claim and delivery" action. – ohwilleke Jan 17 '24 at 21:56
  • More importantly, local police seem unwilling to accept that those retrieving the owner's property are not thieves ... – DJohnM Jan 17 '24 at 23:34
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    Your answer could be improved with additional supporting information. Please [edit] to add further details, such as citations or documentation, so that others can confirm that your answer is correct. You can find more information on how to write good answers in the help center. – Community Jan 18 '24 at 07:16
  • @DJohnM You (and most people) don't understand the role of police. They are not there to enforce the law, but to keep things peaceful. They can punish the victim to stop the fighting. (Though I have a hard time conceptualizing a faceless financing company as a "victim". It's their fault they lent money to someone who couldn't pay it back, and they probably shouldn't exist at all.) More complex laws than "shut the fuck up" are decided by courts. You get a court document giving permission to take the car, then you take the car and the police won't stop you. – user253751 Jan 18 '24 at 07:50
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    Don't understand why this is so downvoted. Default on payment, then it reverts to their property. They're only procuring back their property, which they have the right to do. Now I know people that have been swindled by con companies pretending you didn't make a payment or something... that's a whole different evil. But in general, everything you say is true. Some states may have to go to court to prove right. And some places may make you use the police, but I'd think they're less effective, slower, and often cost more. It's not stealing, it's repossessing what is yours – JeopardyTempest Jan 18 '24 at 15:11
  • Guess it's because it's Legal SE, so they want more supporting foundation, to show such truth in black and white. – JeopardyTempest Jan 18 '24 at 15:13
  • @DJohnM I would expect the repo men to have paperwork showing their right to the property. Furthermore, I also assume the repo men are well known to the cops. – Barmar Jan 18 '24 at 15:41