There are many situations where creditors will need to take action to address the nonpayment of debts. For mortgage lenders, these situations often lead to foreclosure, which can be a complicated and expensive process. However, there may be other options that will allow a lender to take possession of a property, including negotiating an arrangement in which a homeowner will turn over the deed to the home as a way to avoid foreclosure. By understanding when a deed in lieu of foreclosure may be advantageous, a lender can make sure they are taking the correct steps to protect their financial interests.

Benefits and Drawbacks of a Deed in Lieu of Foreclosure

Debtors may have multiple options for addressing delinquent mortgage payments. A mortgage lender may be able to negotiate loan modifications with a homeowner that will allow them to maintain ownership of the home and continue making affordable payments. If continued ownership of the home will not be possible, a debtor may seek a short sale in which the home will be sold for less than the amount owed on the mortgage. However, the best solution may be an agreement in which the debtor will voluntarily turn over the deed to the home to the lender. This may consist of a “cash for keys” arrangement in which the lender will pay a certain amount, and the debtor will vacate the home by a certain date. In some cases, the lender may even agree to lease the property to the debtor on a temporary or long-term basis.

A deed in lieu of foreclosure can often be a beneficial arrangement that will allow a lender to protect its financial interests while avoiding the legal complications of a foreclosure. The lender can quickly take possession of the property without the need to have the debtor removed from the home. Since a deed in lieu agreement will usually stipulate that a property must be in good condition, this may prevent the debtor from damaging the home or taking any actions that would reduce the value of the property.

Creditors often need to address situations where debtors default on loans. For auto lenders, these situations require a timely response, since a vehicle used as collateral for a loan may be moved, concealed, or damaged by a debtor, and a creditor will want to recover the collateral quickly to protect its financial interests. When repossessing a vehicle, a creditor may use the replevin process, and they will need to follow specific procedures and ensure they are complying with their legal requirements.

Pursuing a Replevin Action

In some cases, creditors may be able to complete a repossession by asking a debtor to voluntarily turn over a vehicle, or they may take possession of a car that is in a public location. However, if a repossession would involve a “breach of peace,” a creditor may need to use replevin. For example, if a vehicle is locked inside a person’s garage, a creditor would not be able to enter the location and take possession of the vehicle without first receiving authorization to do so.

A creditor can begin the replevin process by filing a complaint in court. This complaint will describe the property that is being repossessed and state that the creditor has the right to take possession of a vehicle that has been wrongfully detained or concealed by the debtor. The debtor must be provided with written notice of the complaint at least five days before the date of a court hearing that will address the replevin request. However, this notice requirement may be waived if the creditor provides evidence that the debtor is likely to conceal, damage, destroy, or transfer ownership of the vehicle or remove it from the state.

When debtors fail to repay the debts they owe, creditors have a number of options for collecting these debts. If a creditor is able to secure a judgment against a debtor, they may then take action to pursue repayment of the debt. One of the best ways of doing so is through wage garnishment. By having a certain amount deducted from the debtor’s wages on an ongoing basis, a creditor will receive regular payments toward the amount that is owed. However, creditors will need to understand the limits that apply in these cases, and they will need to calculate the maximum amount that may be garnished from a person’s wages.

Wage Garnishment Under the CCPA

Federal laws detail the amounts that creditors may be able to receive from debtors through a wage garnishment order. These limits are specified in Title III of the Consumer Credit Protection Act (CCPA). This law states that deductions may be taken from a debtor’s disposable earnings, which is their income after all legally required deductions have been taken, including federal and state income taxes, Social Security taxes, and any retirement contributions that are required by law.

Wages can only be garnished if an employee earns at least 30 times the federal minimum wage. Currently, the minimum wage is $7.25 per hour, so only the amount more than 30 times this amount ($217.50) can be garnished each week. If a person makes between $217.50 and $290, the amount above $217.50 can be garnished. If a person makes more than $290, up to 25 percent of their wages may be garnished. 

Originally published: January 25, 2018 -- Updated: April 25, 2022

UPDATE: In addition to understanding the situations where it may be possible to object to the confirmation of a Chapter 13 repayment plan, creditors will need to know the procedures that will need to be followed in these cases. If valid objections are made, a debtor may be required to file an amended plan, and in some cases, a bankruptcy case may be dismissed altogether. 

Generally, creditors must make objections to a repayment plan at least seven days before the date of the confirmation hearing where the court will make a decision on whether to approve the proposed plan. Oral objections may be made at the first meeting of creditors (the 341 hearing), or written objections may be filed with the court. If no objections are made within the required time limits, the plan will be considered to have been filed in good faith, and it will usually be approved.

When a debtor files for bankruptcy, the person’s creditors will be understandably concerned about how this may affect their ability to recover the amounts owed to them. While the bankruptcy process will usually allow creditors to receive some of what is owed, there are a variety of issues that may result in creditors receiving less than they should. Preferential payments made by debtors can be a significant issue in these cases, and improper actions by debtors may result in some creditors being treated unfairly. If a creditor believes that a debtor has made preferential payments, they will want to determine how they can address this issue and ensure that these payments will be recovered so that assets seized during bankruptcy will be properly distributed to all creditors.

Elements of Preferential Payments

When filing for bankruptcy, debtors are prohibited from giving preferential treatment to one creditor over other types of debts they owe. Preferential payments made to a creditor prior to when a debtor filed for bankruptcy may be “avoided” by the bankruptcy trustee in their case. Creditors may request that the trustee pursue a “clawback” action to recover preferential payments that were made and ensure that all of a debtor’s assets will be properly distributed during the bankruptcy process.

A payment or transfer to a creditor may be considered preferential if it satisfies all of the following elements:

For creditors, recovering money owed by debtors is a primary concern. There are a variety of issues that can affect a creditor’s ability to receive what is owed, especially in cases where debtors file for bankruptcy. Preferential payments to creditors are one issue that may arise in these cases. If a creditor has received payments from a debtor before the debtor filed for bankruptcy, the creditor may be required to turn over some or all of these payments. In these situations, creditors will need to understand their options for defending against “clawback” actions.

Understanding Preferential Payments

When filing for bankruptcy, debtors are not allowed to provide preferential treatment to one or more creditors. A payment made to a creditor may be considered a preferential payment if it was made within 90 days before the debtor filed for bankruptcy and while the debtor was insolvent. These payments must be made toward “antecedent” debts that had existed previously, and they must have allowed a creditor to receive a higher payment than what would have been made to them in a Chapter 7 bankruptcy. Since preferential payments are illegal, a bankruptcy trustee may seek to recover some or all of the amount that was paid, or other creditors may pursue clawback actions to ensure that all creditors will be treated fairly during the bankruptcy process.

Potential Defenses Against Clawback Actions

The U.S. Bankruptcy Code details a number of exceptions to the rules regarding preferential payments, and a creditor may be able to defend against the recovery of these payments by demonstrating that the payments they received were legitimate. Some of the most common defenses against clawbacks include:

When a debtor files for bankruptcy, this can put creditors in a difficult position. The discharge of a person’s debts will result in creditors not being paid what they are owed. Even if a debtor pursues a Chapter 13 bankruptcy, they will likely only pay off a portion of what they owe, and since certain debts are given priority in these cases, some creditors may be unable to recover a significant percentage of the debts owed to them. However, there are some cases where creditors may be able to request the dismissal of a bankruptcy case, which will allow them to resume collection activities and hold a debtor responsible for the amount they owe.

Reasons for the Dismissal of a Bankruptcy Case

In many cases, courts will dismiss bankruptcy cases because debtors fail to meet all of their legal requirements. Creditors may be able to pursue a dismissal in situations such as:

• The debtor failed to file the proper forms and documents - Multiple legal forms must be filed throughout the bankruptcy process, and other information must be submitted within the proper deadlines. If a debtor does not submit a complete list of creditors, fails to file tax returns or submit the tax returns they have filed to the bankruptcy trustee, or does not pay the required filing fees, their case may be dismissed.
• The debtor did not meet the qualifications for Chapter 7 bankruptcy - To receive a discharge of debts through Chapter 7, a debtor must pass a means test showing that their income is below the median income level in their area or that they do not have sufficient disposable income to repay a significant portion of their debts. If a creditor can show that a debtor is unable to pass the means test, they may ask for the court to dismiss the debtor’s Chapter 7 case.
• The debtor failed to complete credit counseling - Debtors must complete required educational courses prior to filing for bankruptcy and prior to receiving a discharge of their debts. Creditors may ask for a case to be dismissed if a debtor does not submit the proper certificates at the right times showing that these courses have been completed.
• The debtor did not make the required payments in a Chapter 13 repayment plan - In a Chapter 13 bankruptcy case, a repayment plan will be created in which a debtor will make monthly payments over a period of three to five years. Even one missed payment may allow a creditor to request that the bankruptcy case be dismissed, which will allow them to take action to collect the debts that are owed to them.
• The debtor committed bankruptcy fraud - Debtors may purposely falsify information about their income or assets or otherwise attempt to receive an illegitimate discharge without meeting the proper qualifications. Serial bankruptcy filers may also abuse the bankruptcy system by seeking a discharge of their debts multiple times after they have failed to be financially responsible. Creditors may be able to provide evidence that a debtor has purposely provided incorrect information or otherwise violated the law, allowing for a case to be dismissed so that the creditor may seek repayment for the debts that are owed.

Contact Our Chicago Bankruptcy Dismissal Attorneys

Walinski & Associates, P.C. provides legal help and representation for creditors in bankruptcy cases. We work to help our clients determine when a dismissal may be available while ensuring that they take the correct actions when collecting debts. Contact our Chicago, IL creditors’ rights lawyers at 312-704-0771 for assistance with these matters.

Creditors take on risk when they loan money to debtors, and they may use a variety of methods to protect their interests and ensure that they will receive the payments owed. In cases where debtors do not have sufficient credit history or where a creditor believes that a person may not be able to repay their debts, a co-signer may provide a guarantee that the amount owed will be paid. In cases where the primary debtor defaults on a loan or files for bankruptcy, creditors will need to understand their options for collecting the debt from the co-signer.

When Is a Co-Signer Liable for a Debt?

Generally, creditors are able to collect debts from either the primary borrower or a co-signer. However, they will need to meet the requirements of the laws in their state when collecting from a co-signer. In Illinois, debtors cannot take collection actions against a co-signer unless they notify the co-signer that the primary debtor has defaulted on the loan. This notice must be sent to the co-signer through first-class mail, and a creditor must give the co-signer 15 days after the date the notice was sent to pay the amount owed or make arrangements to do so. If a co-signer does not respond to the notice or fails to take steps to pay what is owed, a creditor may take a number of actions, including notifying credit agencies, contacting the co-signer directly to seek payment or initiating a civil case to collect a money judgment.

A creditor’s ability to collect debts from a co-signer may be affected by a bankruptcy petition filed by the primary debtor. After a debtor files for bankruptcy, the creditor will be prevented from taking collection actions by an automatic stay. If the debtor files for Chapter 7 bankruptcy, a creditor may take steps to collect debts from a co-signer if the case is dismissed or if the primary debtor receives a discharge of their debts. If the debtor files for Chapter 13 bankruptcy, a codebtor stay will remain in effect preventing a creditor from taking collection actions during the primary debtor’s repayment plan. However, if a Chapter 13 case is dismissed or converted to Chapter 7, a creditor may be able to collect debts from a co-signer. A creditor may also be able to file a lift stay motion asking the court to allow them to pursue repayment from a co-signer.

Creditors have multiple options for collecting debts that are owed. However, debt collection efforts may be affected by a debtor’s bankruptcy filing. In cases where a person files for Chapter 7 bankruptcy, certain types of debts may be discharged, preventing a creditor from collecting what is owed. Creditors will want to understand how different types of debts will be affected by a Chapter 7 bankruptcy and how they should proceed in these cases.

Creditors’ Rights Regarding Secured and Unsecured Debts

During a Chapter 7 bankruptcy, a debtor’s non-exempt assets will be seized, and these assets will be liquidated. The proceeds received from the sale of assets will be used to repay some or all of what is owed to creditors. However, payments are made in order of priority, and a creditor’s ability to recover what is owed may depend on whether a debt is secured or unsecured.

Secured creditors are given a higher priority, and they are entitled to receive either the value of the debt that is owed or the collateral used to secure the debt, whichever is less. If assets are seized and liquidated, secured creditors may receive the full amount of what is owed, or they may repossess the collateral. Debtors also have the option to redeem secured debts by paying a lump sum to the creditor for the value of the collateral.

There are a variety of ways that creditors may be able to address delinquent debts. While pursuing foreclosures or repossessions may be the best option in many cases, creditors may be able to mitigate their losses and ensure that debtors will be able to make ongoing payments by negotiating loan modifications. However, in some cases, these modifications may be classified as troubled debt restructurings (TDRs), and they may need to be reported to the appropriate regulatory agencies. By understanding when loan modifications are considered to be TDRs, creditors can ensure that they are in compliance with all applicable laws and regulations.

What Is a TDR?

Creditors may work with debtors to make multiple types of loan modifications that are meant to help a debtor afford ongoing payments and prevent the default of a loan. A loan modification may be considered a troubled debt restructuring if a borrower has experienced financial hardship and a lender makes concessions that typically would not be made in other situations. While defaulting on one or more payments may be an indication of financial hardship for a debtor, other financial issues that may affect a person’s ability to make payments may also be considered, such as the loss of a job. Concessions that a lender may make may include:

• A permanent reduction of the loan’s interest rate
• Forgiveness of some of the principal of the loan
• A reduction in the amount of interest that has accrued on the loan
• Extension of the term of a loan at an interest rate that is below the current market rate

Modifications that are considered to be TDRs may need to be reported as nonaccrual assets, and they may need to be considered when estimating a creditor’s Allowance for Loan and Lease Losses (ALLL). In some cases, these loans may need to be charged off.

Originally published: May 31, 2020 -- Updated: December 28, 2021

UPDATE: While Governor Pritzker’s executive order had placed a halt on vehicle repossessions, this restriction expired on August 22, 2020. For more than a year, auto lenders and other creditors have been able to engage in asset recovery methods and repossess property in cases where debtors have defaulted on loan payments. However, as the COVID-19 pandemic continues to affect people, some creditors may be hesitant to move forward with repossessions, and they may be looking to determine whether other alternatives are available.

When a debtor who owes money to a creditor defaults on these obligations, the creditor will have a number of options for recovering the amount that is owed. However, debtors have the option to file for bankruptcy, which will affect a creditor’s ability to collect debts. Debtors who have secured debts such as home mortgages or auto loans may pursue Chapter 13 bankruptcy, or they may use this type of bankruptcy to avoid the liquidation of certain assets. A Chapter 13 bankruptcy will create a repayment plan that will allow some of the person’s debts to be repaid over a period of three to five years. In these cases, creditors will need to be sure to understand how they can protect their rights and their ability to recover at least some of the debts that are owed.

Priority of Debts in a Chapter 13 Bankruptcy

A Chapter 13 repayment plan will be created based on a debtor’s disposable income. The amount that a person will be able to put toward their repayment plan each month will be calculated by considering all forms of income and subtracting applicable expenses, including taxes, living expenses, utilities, transportation costs, and union dues. The amount remaining will be considered disposable income that the debtor may use to make ongoing payments throughout the entirety of their repayment plan.

When determining how the amount paid through a repayment plan will be allocated between different creditors, certain types of debts will be prioritized differently. Domestic support obligations, including child support or spousal support, are given the highest priority. Secured debts will usually be given the next highest priority. Unsecured debts will be addressed after payments are applied toward other types of claims. When debts are classified into different categories, the debts within each category must be treated equally, and a plan cannot unfairly discriminate against different claims within a certain class.

A creditor’s ability to collect debts that are owed will be affected by a debtor’s bankruptcy filing. After a debtor files a bankruptcy petition, the creditor will be subject to an automatic stay that will prevent them from taking any collection actions. However, there are some situations where creditors may be able to file a lift stay motion asking the court to allow them to take action to protect their financial interests. By working with an attorney who has experience in matters involving debt collection, a creditor can make sure they will be able to recover as much of what is owed as possible.

Relief From the Automatic Stay

In general, a creditor may be able to lift the automatic stay if they can show that they will suffer immediate and irreparable losses due to their inability to collect debts. The court may allow the automatic stay to be lifted in multiple situations, including:

Lack of equity in property secured by collateral - In a secured debt such as a home mortgage or auto loan, the property purchased through the loan will serve as collateral. If the value of the property is less than what the debtor owes on the loan, the debtor will not have enough equity in the property to repay what is owed. In these cases, a creditor may be able to have the automatic stay lifted so that they can proceed with a mortgage foreclosure or the repossession of property. Even if a lift stay motion is not granted, a creditor may proceed with repossession if a debtor does not take steps to redeem or reaffirm a secured loan within 30 days after filing for bankruptcy.

Creditors lend money to debtors under the presumption that these debts will be repaid. If a debtor fails to make the required payments, creditors can take action to collect the debts that are owed. However, there are a variety of laws that apply to debt collection, including the Fair Debt Collection Practices Act (FDCPA). Creditors and collection agencies will need to make sure they are in compliance with these laws, and they can make sure they are doing so by working with an experienced debt collection attorney.

Restrictions on Debt Collection Activities

In general, the FDCPA prohibits creditors and debt collectors from engaging in unfair or harassing actions against debtors. The restrictions that apply under this law include:

• When a debtor can be contacted - Creditors cannot contact debtors at times that are known to be inconvenient. The law specifically prohibits calls made to a debtor before 8:00 a.m. or after 9:00 p.m. in the time zone where the debtor is located. However, there are some cases where creditors may receive permission from a court or a debtor to contact a person outside of the hours that are normally allowed.
• Harassment or abuse - Debt collectors cannot attempt to intimidate debtors into complying with their requirements. Prohibited actions include threats of violence, the use of obscene language, coercion through threats to ruin a person’s reputation, or repeatedly contacting a debtor without providing identifying information or describing the types of debts that are being collected.
• False or misleading statements - A debt collector cannot lie about their identity, such as by claiming to be a law enforcement officer or government official. They cannot falsely report the amount that is owed or make any untrue statements about whether a person will be arrested or face criminal prosecution if they do not pay the debts owed.
• Unfair debt collection practices - Creditors cannot charge unauthorized fees when collecting debts, and any additional charges must be allowed under the original contract with the debtor or any applicable laws. Creditors are also prohibited from publicly revealing that a person owes debts or the amount that is due, such as by including this information on a postcard sent to a debtor.
• Who can be contacted - A creditor may communicate directly with a debtor. This communication will usually be limited to contacting a debtor at home or via a personal phone number or email address. In some cases, a creditor may be able to contact a debtor at their place of employment, although this will be prohibited if a debtor notifies a creditor that they should not be contacted in this manner. If a debtor retains an attorney, creditors or debt collectors must communicate with the attorney rather than contacting the debtor directly.

Contact Our Chicago Creditors’ Rights Attorneys

While creditors have a number of options for collecting debts, they may run into trouble if they violate the FDCPA or other laws that apply to them. Creditors can ensure they are in compliance with all applicable laws by working with an attorney. Walinski & Associates, P.C. can provide legal representation for creditors, and we can help pursue legal action against debtors who have failed to meet their obligations. Contact our Chicago debt collection lawyers today at 312-704-0771 to learn how we can address your legal needs.

Mortgage lenders have options for ensuring they receive the amount owed from homeowners, and when a person defaults on their mortgage payments, a lender can initiate foreclosure proceedings. However, second mortgagees may be unsure about their options in these cases, including whether they can collect payment following a short sale or another situation where the sale of a home will not fully cover the amount owed. By working with an attorney who understands laws that affect debt collection, second mortgagees can determine their best options for receiving payments following a foreclosure.

Foreclosure and Subordinate Loans

In a second or subsequent mortgage or home equity line of credit (HELOC), a borrower will be taking out a loan against the equity they own in their home. Most of the time, these loans are considered to be subordinate loans, and the first mortgage will have the priority claim to the property. If a homeowner defaults on their first mortgage, the lender may foreclose on the home. Second mortgagees may also initiate foreclosure proceedings if the homeowner has remained current on their first mortgage but has defaulted on subordinate loans.

During the foreclosure process, a home will be sold, and the proceeds of the sale will be used to pay off the amount owed by the homeowner. A first mortgage will have priority, and second mortgagees will only receive payments if there is enough money left over after paying off the first mortgage. In short sales or other situations where a home is sold for less than what is owed on a first mortgage or any subsequent mortgages, a second mortgagee may not receive enough to fully cover the amount that is owed.

When a debtor files for bankruptcy, this can put creditors in a difficult position. Loans from creditors to debtors are made with the presumption that the debtor will repay the amount that is owed. While bankruptcy may relieve debtors of their obligations to repay certain debts, it will also allow for some of these debts to be repaid. When an individual files for Chapter 13 bankruptcy, or when a business files for Chapter 11 bankruptcy, the debtor will propose a reorganization/repayment plan in which they will pay off certain debts. If this plan will not properly address some of the debts that are owed, creditors may object to the confirmation of the plan. By understanding when these objections can be made and the potential reasons for objecting, a creditor can ensure that its financial interests will be protected.

Issues Affection Objections to Confirmation

A creditor must have “standing” to object to the confirmation of a bankruptcy reorganization plan. Generally, a creditor will be able to object if they are a “party in interest,” meaning that they have a financial interest in the outcome of the bankruptcy case. A creditor must also be directly affected by the issues that are being challenged in the plan, and their objections must be based on the potential unfair losses that they may experience if the plan is confirmed.

Objections to confirmation will often be based on the best interests of the creditor. A reorganization plan must pay creditors at least the amount they would receive if the debtor’s assets were liquidated in a Chapter 7 bankruptcy. Creditors may also object on the basis that the amount of a debt has been understated, that certain priority debts have not been included in a reorganization plan, or that a debtor’s disposable income was calculated incorrectly. Objections may address the amount that will be repaid, the timing of payments, or the classification of debts.

Car loans are some of the most common types of debts held by consumers, and in most cases, auto lenders have options for recovering what is owed when a debtor fails to meet their obligations. While a lender may be able to repossess a vehicle following a default by a debtor, this may not fully cover the amount owed on the loan. In these cases, lenders may pursue a deficiency judgment against the debtor. Lenders should be aware of the potential issues that may affect them in these situations.

Issues That May Affect Deficiency Judgments

After a lender repossesses a vehicle, it may sell the vehicle through an auction or other methods. If the amount received from selling the vehicle was less than the amount that the debtor owed on their auto loan, the lender may attempt to collect the additional amount owed, as well as costs related to the repossession, through a deficiency judgment. Lenders should be aware of issues that may affect their ability to collect a deficiency judgment, which may include:

• Notice - A lender is required to mail a debtor a notice stating that they have the right to redeem the vehicle by paying off the loan and any other amount owed. Depending on the loan agreement, a lender may also provide the debtor with the option to reinstate the loan by making up all past-due payments, penalties, and other costs. If a lender did not provide the debtor with the proper notice or failed to provide other required information, such as a full description of the deficiency balance, the lender may not be able to collect a deficiency judgment.

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Creditors will often need to address situations where debtors do not pay the debts they owe. While creditors can often take action to recover what is owed through debt collection practices, they may be concerned about their ability to collect debts when a debtor files for bankruptcy. In these cases, creditors will need to understand how different types of debts are prioritized and when they may be able to recover what is owed.

Bankruptcy and Priority of Claims

A creditor’s ability to recover debts during a bankruptcy case will depend on their type of claim and whether the debtor is filing for Chapter 7 or Chapter 13 bankruptcy. When a debtor files for Chapter 7, the bankruptcy trustee will liquidate their non-exempt assets, and the proceeds will be distributed among the creditors. When a debtor files for Chapter 13, they will submit a proposed repayment that will last for a period of three to five years, and these payments will be distributed among the creditors whose debts are included in the plan.

Debts are repaid to creditors in the following order:

For most of 2020 and 2021, mortgage lenders have been unable to pursue foreclosures in cases where homeowners have federally-backed loans. The CARES Act placed a moratorium on foreclosures, and it also allowed borrowers who have been affected by the COVID-19 pandemic to receive a forbearance of mortgage payments. This moratorium ended on July 31, 2021, allowing lenders to pursue foreclosures in certain cases. However, the Consumer Financial Protection Bureau (CFPB) has created new rules requiring lenders to meet certain requirements before initiating foreclosure proceedings, including providing loan modification options for borrowers.

Requirements for Mortgage Loan Servicers

Under the CFPB’s rule, mortgage lenders and servicers will need to meet certain requirements before they can initiate a foreclosure prior to January 1, 2022. A borrower must be given the opportunity to complete a loss mitigation application, and after an application has been submitted, a lender can only pursue foreclosure if the borrower is not eligible for loss mitigation, rejects all loss mitigation options, or does not meet their requirements to complete a loan modification. Foreclosures can also be initiated if a property has been abandoned or if a borrower does not respond to a lender’s loss mitigation outreach attempts for 90 days.

For borrowers who have received a forbearance due to hardship related to COVID-19, the lender must contact the borrower at least 10 days but no more than 45 days before the end of their forbearance period and advise them of their loss mitigation options. Lenders are required to use reasonable diligence to help a borrower complete a loss mitigation application. Even if a borrower does not fully complete an application, a lender may offer loan modification options. However, certain restrictions apply to these modifications:

When a borrower defaults on a loan, a creditor has the right to repossess the collateral used to secure the loan. This option may be used by auto lenders or other creditors, and a vehicle or other property may be repossessed if a borrower fails to make the required payments. However, a debtor may attempt to avoid repossession by hiding a vehicle or other property, keeping it locked inside a garage, or moving it to a location where it cannot be accessed. In these situations, a creditor may be able to file a detinue complaint against the borrower, asking the court to require the debtor to turn over the property or face consequences.

When Is Detinue Appropriate?

Typically, creditors use the legal process of replevin to repossess property. In these cases, a creditor will be required to post a bond, and a court order will be issued giving the sheriff the authority to seize the property. A representative of the creditor will usually need to accompany the sheriff when executing the repossession order. However, if the property cannot be located, a replevin action may not be appropriate. 

Detinue differs from replevin in that it will seek recovery of property that is wrongfully held or retained by a borrower rather than property that has been wrongfully taken. When pursuing a detinue complaint, a creditor will ask the court to issue an order requiring the borrower to turn over the property in question or repay the creditor for the value of the property that has been wrongfully sold or destroyed. If the borrower refuses to comply with the court’s orders, they could be held in contempt of court and face penalties such as fines or jail time.