Should You Voluntarily Give Back Your Auto Before Repossession?

24 May Should You Voluntarily Give Back Your Auto Before Repossession?

Okay, so you can’t afford your car anymore. It looked nice on the lot and you believed you could make the payments, but now? Last month’s payment was used to pay the day care provider and ……….. and the car creditor is calling five times a day threatening that a repo man will come get the car. (For options when those calls become abusive, click here for my previous blog on protecting yourself from creditor abuse and here from protection yourself from the debt collector)

Simple solution is to just tell them to come and get the car, right? Wrong!! When you voluntarily surrender the car (or whether the repo man comes and gets it), the next step is that the car creditor will sell the car at auction.

At the auction are other car creditors, hoping to buy cars for far less than their value. Your car will be sold for much less than you owe. That money from the auction will be applied to the fees generated either by the repo man or the car creditor in taking the car to the auction and then to your loan.

The amount due on your loan is decreased by that sale amount but the rest remains, and then the car creditor starts trying to collect it. The car creditor may keep the debt or they might transfer the debt to a debt collector. And then the phone calls from the debt collector start.

At some point, someone will decide that suing you is the way to get their money and a lawsuit is started. If you don’t respond to the lawsuit, the car creditor/debt collector will obtain a judgment. That judgment enables the car creditor/debt collector to put a lien on your house, garnish your wages, and/or seize money from a bank account. You could find yourself paying for a car years after you “just give it back.”

It is always better to try to sell the car yourself. If you cannot sell it for enough to pay off the loan and obtain the title, sometimes it is better to take out a small loan to make up the difference, a loan that is not secured by the car (so you can still sell the car).

A financial advisor over at suggest taking out a home equity loan. Wrong again!!! Why on earth would you want to pay for that car over 30 years? The small loan payments are going to be less than the car payments probably, and you won’t have the notation on your credit report that the car was either “voluntarily surrendered” or that it was repossessed.

My colleague over at, Georgia attorney, Jonathan Ginsberg talks about the ultimate solution to discharging the debt and getting rid of the car by filing bankruptcy and surrender the car in the bankruptcy process–or to discharge the remaining balance, post-auction, in the bankruptcy. Each state’s laws about bankruptcy are different and you should consult an experienced attorney in your area before making any decision.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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