Yes the are allowed to do it, and yes they are well within their rights to do it, and yes you should expect them to.

Any outstanding amounts after the repossess the goods will be sent to a collection agency - further blacklisting your credit rating.

Sorry to be harsh, but that is exactly what happens. You really REALLY need to seek some professional help about your financial situation - and find some good advice on money management or you are going to find you cannot even open bank account.