QUESTION
I have a financed car for which I can't afford the payments. is voluntary repossession, or bankruptcy the better option?
Asked on Jul 09th, 2013 on Bankruptcy - California
13 ANSWERS
Bankruptcy Law Attorney serving Austin, TX
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Law Office of Susan G. Taylor
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Depends on many factors, including whether you have other debts that could be dischargeable.
Answered on Jul 11th, 2013 at 7:40 AM
If you return the vehicle, you can expect the lender to sue you for the difference between the amount financed and the net sale price at a wholesale car dealers auction. Bankruptcy would eliminate your legal obligation to pay for this difference, but I cannot say whether or not you would qualify for bankruptcy with the information provided.
Answered on Jul 10th, 2013 at 11:44 AM
Chapter 7 Bankruptcy Attorney serving Appleton, WI
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Sisson & Kachinsky Law Offices
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Repossession would potentially be a cheaper solution.
Answered on Jul 09th, 2013 at 7:24 PM
If you owe more on the car than it is worth, and you voluntarily repossess it, then the lender will sell the car and apply the proceeds to the loan and you will remain liable for the balance. If you file bankruptcy and give up the car, you will walk away from the loan completely.
Answered on Jul 09th, 2013 at 7:19 PM
General Practice Attorney serving Coeur d'Alene, ID
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Michael B. McFarland, PA
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In a voluntary repossession (or surrender) the lender will sell the car at wholesale, and hold you responsible for the difference. In a bankruptcy, you can surrender the car and will not be responsible for any balance. However, unless you have other debt, (or the balance that will be left is very large) bankruptcy may not be your best choice. If you have any equity in the vehicle, you might be able to sell it for enough to pay it off, leaving no deficiency balance. You might also find someone who wanted the vehicle and could qualify to take it over ( which would require the lender's permission) or who could refinance it in his/her own name. DO NOT turn the car over to someone who agrees to make payments on your behalf.
Answered on Jul 09th, 2013 at 7:19 PM
Bankruptcy Law Attorney serving Livingston, NJ
Partner at
Law Office of Stuart M. Nachbar, P.C.
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That would depend on how much other debt you have , your intent on that debt and how you feel about deficiency judgments.
Answered on Jul 09th, 2013 at 7:18 PM
Personal Injury Attorney serving Murrieta, CA
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Law Offices of Kevin Cortright
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Neither are optimum as they will both hurt your credit. If you just allow the repossession then the lender will likely file a lawsuit and obtain a deficiency judgment for the money that they lose when they sell the vehicle at auction.
Answered on Jul 09th, 2013 at 7:18 PM
Bankruptcy Attorney serving Florissant, MO
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Law Offices of Thomas Corcoran Phipps
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If that is your only debt, you may not want to file a bankruptcy. If you owe a lot on credit cards and other secured debts, you would include the car loan in the bankruptcy.
Answered on Jul 09th, 2013 at 7:18 PM
Bankruptcy Attorney serving Phoenix, AZ
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Law Office of D. L. Drain, P.A.
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It depends on your unique situation.
Answered on Jul 09th, 2013 at 7:17 PM
Regulatory Attorney serving Spokane, WA
Partner at
Deissner Law Office, P.C.
In Washington, a true voluntary repossession relieves you of the duty to pay the deficiency balance on the loan (you are probably 'upside down' and owe more than the dealer will sell the car for at auction.) Because of this almost no dealers/finance companies will accept a voluntary repossession. So to avoid paying the entire contract balance you might have to go Bankruptcy. However if the finance company will agree IN WRITING not to pursue a deficiency, that would work. If you are not upside down, you should try to sell the car and pay off the note.
Answered on Jul 09th, 2013 at 7:17 PM
Consumer Bankruptcy Attorney serving Los Angeles, CA
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Orantes Law Firm
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If by "voluntary repossession", you mean that you would return the car to the dealer/financer, the result of that would likely be that the financing company would auction off the car and then bill you for any deficiency. Of course, in my experience with my hundreds of clients, banks tend to purchase the car back themselves at a low amount, which results in a large deficiency. In the end, if you cannot afford to pay back at once the amount of the deficiency, you may have to file for bankruptcy protection anyway. All of this suggests that you should explore bankruptcy first before returning the vehicle to see if a bankruptcy is a better alternative.
Answered on Jul 09th, 2013 at 7:16 PM
Complex Litigation Attorney serving Costa Mesa, CA
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Thomas Vogele & Associates, APC
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You should never consider bankruptcy as a means to get out from under a single bad contract such as this. Bankruptcy effects your financial life for ten years, making it difficult to function in today's financial world. If you have a bad car loan or lease, talk to the lender and try to work out a deal that cancels your exposure and avoids a default.
Answered on Jul 09th, 2013 at 7:16 PM
Bankruptcy Attorney serving Walnut Creek, CA
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Alan E. Ramos Law Offices
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If you turn it back in to the lender, you will most likely be liable for any deficiency (the amount owed after applying the funds received by the lender after an auction). If you file a bankruptcy petition, the lender can repossess the vehicle and you will have no personal liability for any deficiency. Of course, the decision to file a bankruptcy petition involves much more than this one issue and all facets of your financial life need to be incorporated in the analysis before making the final decision. This answer was provided as a public service to a question posed on the Law Q & A website. The answer is based on the information provided and is limited to those facts.
Answered on Jul 09th, 2013 at 7:15 PM