Legality of "stealing" assets from Debtors

Question

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.

Answer 1

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.

Answer 2

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.

Answer 3

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.

Answer 4

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.