Bankruptcy and hire purchase agreements

What is a Hire Purchase Agreement?
Hire Purchase agreements are agreements for purchase of goods or vehicles. It is mostly used for cars though furniture and white goods can also be purchased through such agreements. The main difference between these agreements and the normal credit agreements is that in these cases, you do not own the good unless and until they have been completely paid. This also states that you do not have any rights to sell the goods without the creditor’s permission and it is a criminal offense to sell the property without prior permission of the creditor. It is also possible that the creditor can claim the good back in cases of non-payment which is also in contrast to the normal credit agreements where the creditor cannot claim the goods once purchased.

What happens when you declare bankruptcy?
In cases of Bankruptcy, the Hire Purchases agreement also becomes one of your defaulted loans. Under such circumstances, the creditor can decide to take back the goods and cancel the agreement. This might be normally included as a clause in the initial agreement form.
Your agreement might also state about repossession rights and clauses. Repossession is the transfer of rights back to the creditor due to defaulted payments and this is done normally with your consent and without any court interference. Normally repossession is possible if you have not paid more than one-third of the agreement amount. In cases where you have paid more than one-third, the goods becomes “protected goods” and the company cannot take away the goods without your consent or without a court order. Also even if you have paid less than one-third the agreement amount, the company will require either your consent or the court order to repossess goods.
In case you wish to hold the good, you can talk about the payment options to the hire purchase company depending on the official receivers approval. This would require you to either adhere to already established payment amount or negotiate for a revised amount based on your monthly income.

What are the options for terminating Hire Purchase Agreements?
Hire Purchase Agreements can be terminated in two ways. You can either opt to terminate and end the agreement on your own and return the goods to the creditor voluntarily or let the creditor terminate the agreement and repossess the goods. The difference in both the methods is the amount you would end up paying after returning or repossessing the goods.

What happens when you terminate the agreement?
You can opt to terminate the agreement as long as the full amount has not been paid or if the creditor has not terminated the agreement. The amount that is payable to the creditor upon returning the goods and cancelling the agreement is 50% of the total amount and it is in general mentioned in your agreement. The 50% that is payable includes any deposits or instalments that have been paid already. Sometimes you might also need to pay extra for any damages or arrears if any. It is also a must that the agreement is ended by you in writing as a statement of proof of termination.

What happens if the creditor terminates the agreement?
A creditor is liable to cancel the agreement if you fail to adhere to the agreement. He send you a default notice ordering for return of the goods. The notice also states all missed payments and the total arrears payable by you. In case you do not pay the outstanding amount by the date mentioned in the creditor’s notice, you become liable for payment of the complete amount and the agreement also gets cancelled. The creditor also receives complete rights to repossess the goods.

What happens once the goods are returned?
Once the goods are returned to the creditor, he looks into the balance that is still payable by you to him. You can opt to pay him on a monthly basis depending on your financial status and try to work out an extended repayment period. But in case he rejects your offer, he can even sue you in the court demanding repayment of his debt. You can at all times seek professional expertise or help so as to clear off any disputes or to seek legal advice.

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