Where Experience Counts And Results Matter

What options may creditors have to recover debts?

| Feb 9, 2018 | Banking & Business Transactions |

When a bank issues a person a loan, such as a mortgage or auto loan, they do so with the expectation that they will receive the amount loaned back plus interest. Unfortunately, for a variety of reasons, a debtor may fail to uphold their end of the agreement and will default on the loan. When this happens, creditors in Tennessee may need to turn to the court in order to obtain what is owed to them.

One remedy a creditor might pursue to recover debts is a replevin action. In this type of action, the creditor may take back the asset that they hold title to. In order to do this, however, there are certain requirements that need to be met, such as notifying the debtor about the replevin action and holding a hearing. That being said, it may be possible to waive such requirements in cases in which there is an imminent danger that the asset will be destroyed.

Another remedy a creditor might pursue is attachment. The procedures for attachment proceedings are laid out in state statutes. In general, there will be a court hearing, followed by an order by the court giving the creditor permission to take back the asset or title to the asset at issue. Usually a creditor can only seek an attachment proceeding if there are extraordinary circumstances, for example, if the debtor is actively trying to get rid of the asset.

If these measures fail, it may be possible for a creditor to file a lawsuit in order to obtain what is owed to them. If successful, an enforceable judgement will be issued in the creditor’s favor. Then, with the help of the local sheriff, the creditor can take back as much of the asset as is necessary to cover the debt. Sometimes the asset will be sold, or a lien will be issued in order to satisfy the debt.In very extreme cases, it may be possible for a creditor to pursue an involuntary bankruptcy to collect what is owed to them.

As this shows, creditors have options when a debtor defaults on a loan. However, executing any of these options can be complex, and any mistakes made could jeopardize a creditor’s ability to collect what is owed. Therefore, creditors in such situations may want to seek legal advice before proceeding.

Source: FindLaw, “Creditors’ Rights and Collection Options,” accessed Feb. 6, 2018