The terms in most preferred ship mortgages allow lenders to repossess and sell boats without federal court foreclosure procedures if the lenders have an affidavit of repossession granting them foreclosure rights, reports Boating World magazine. When they sell the repossessed boat, lenders submit the bill of sale and the affidavit to the Coast Guard. However, if the boat has an outstanding marine lien, repossession must occur through a federal court with the oversight of a federal judge and U.S. Marshal.Continue Reading
When foreclosing on boat mortgages without liens, lenders have the option of bypassing judicial procedure if the owner clearly defaulted on the loan, according to Boating World. Lenders may choose this option, depending on the value of the boat and the possibility of other creditors, to avoid the high cost of going to court. Alternatively, if there is a chance the boat owner may contest the repossession or competing creditors may make claims, lenders may opt for federal court supervision so U.S. Marshals can maintain order and a judge can quickly resolve disputes.
Marine liens arise due to unpaid services such as shipyard repairs or events such as salvage claims or onboard personal injuries, explains Boating World. When boat foreclosures involve liens, U.S. Marshals must perform a civil arrest of the vessel, and lenders must file lawsuits in federal courts. Potential buyers who are unsure about the status of a repossessed boat should get the help of a qualified maritime attorney.Learn more about Vehicles