The saying, “the early bird gets the worm” is not always the best advice to take.  For example, if you have already consulted with your bankruptcy attorney and decided that once you file your bankruptcy you will be surrendering your vehicle, giving it up voluntarily before the bankruptcy is filed is not the best decision.  You should wait until you actually file the bankruptcy then give up the vehicle at that time.

Why should you wait?  Simple answer: to help protect your credit from being more affected than it should.  Filing a bankruptcy obviously gives you a major “ding” on your credit, but if you were to turn in your vehicle, the finance company reports that voluntary repossession as a repossession in general and does not specify the type of repossession; there is no way to distinguish on your credit that the finance company did not take the vehicle, but you instead gave it back.  So after filing bankruptcy when you are trying to get your credit back in shape, your credit report will show two “dings”, it will reflect as having a repossession, then a bankruptcy filing. Also, by just giving up the vehicle voluntarily you leave yourself vulnerable for being responsible for the deficiency balance on the vehicle.

If you wait until you actually file the bankruptcy petition then contact the finance company and surrender the vehicle everything goes through the bankruptcy filing.  Therefore your credit is only affected once instead of twice.  Not to mention in some cases the finance company will not even collect the vehicle until they have an Order on Relief from Stay (meaning they have the courts’ permission to actually pick up the vehicle). If you are behind on a vehicle and you are considering giving it back to the finance company, it is strongly suggested that you consult with your bankruptcy attorney as to what is the best course of action for you.