Am I Responsible for the Loan On My Car If I Voluntarily Turn it In?

Jun 24, 2011 2 Comments by


Yes, you will still be responsible for the loan or debt on your vehicle even if you voluntarily turn it in. If you have a vehicle that you cannot make payments on, you have the choice of voluntarily surrendering the car or you can let the creditor repossess it. What many people do not know is voluntarily surrendering the vehicle is still considered a reposession on your credit report, a voluntary reposession.

Questions About BankruptcyWhen you voluntarily surrender a vehicle, you take the vehicle back to the lender on your own terms. You can usually contact the lender and they will work with you on a time to turn the vehicle back in.

If the vehicle is non-voluntarily or involuntarily repossessed, they will come and get the vehicle on their terms. The lender may not care when this is and it could even occur at night or at a time when you are not around.  There are also fees associated with a repossession that you can avoid if you voluntarily surrender the vehicle.

Although voluntarily turning a vehicle in sounds like a better option, it’s important to know the consequences of a voluntary reposession. When you surrender a vehicle, it will be sold again. The lender will then send you a bill for what is called a deficiency balance. This is the difference between the amount you owed on the vehicle and what they were able to sell the vehicle for. So say if you owed $14,000 and they sold the vehicle for $8,000, you would still be responsible for the difference of $6,000. This is the same thing that would occur if the lender had involuntarily repossessed your vehicle.

So in the long run, you will be responsible for part of the loan if you voluntarily surrender your vehicle.  Depending on how much you owe on the vehicle and how much the lender resells the vehicle for will determine the deficiency balance. You will be responsible for the deficiency balance and the voluntary reposession will still show up on your credit report.

If you file for bankruptcy then you may be able to avoid the repossession appearing on your credit report (if you file before the repossession) and you can wipe out the deficiency balance on the vehicle.

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We practice primarily in the areas of bankruptcy and workers' compensation. We have offices in Charlotte, Greensboro and Winston-Salem, NC.

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2 Responses to “Am I Responsible for the Loan On My Car If I Voluntarily Turn it In?”

  1. Catherine S. says:

    I still have another vehicle financed with the same instition in which I want yo volunteer surrending a vehicle in which my daughter abandoned when she no longet wanted to pay for it, I financed the car in my name for her because she had no credit & wanted her to have a reliable car but had no ideal she would do this to me, I tried to keep the car but I can no longer pay for two cars. I am financially burden & can’t do this any longer so I have to surrender her car back!! PLEASE I need advice! !

  2. Damon Duncan says:

    Catherine,

    You are in really difficult position (I know I’m not telling you anything you don’t already know) and I would talk to an attorney. If you voluntary turn in the vehicle they are going to come after you for the deficiency balance. Depending on the terms of the financing, they may have cross collateralized the loan you had on one vehicle to your other primary vehicle. Depending on how much the deficiency balance will end up being and whether you have other debts it may make sense to explore bankruptcy as an option. Contact an attorney, though, they can help walk you through the process. I’m sorry you are having to deal with this!

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