Advice on auto loan default

I defaulted on my auto loan. The bank sent me a notice demanding full payment. What can I do?

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Bill's Answer: Answered by Mark Cappel

Call the bank to discuss the options available to bring the loan current. Now that you have found a job and can afford the make the payments going forward, I would be very surprised if the bank is not willing to work with you in catching up on the payments. Since you were only out of work for one month, I assume you only missed one or two payments, so bringing the loan current should not be too difficult.

Again, I would be very surprised if the lender is not willing to work with you in resolving the default -- both the creditor and debtor lose money in a repossession.

If the lender is not willing to work with you, the only alternative I can see would be to borrow the money to bring the loan current. Depending on your credit, you may be able to go to your bank or credit union and ask for a small loan to repay the missed payments. If your credit is problematic, you may need to ask your family and friends for help bringing the auto note current.

If the vehicle is repossessed, you will not only be without a vehicle, but you will probably also still owe the finance company a lot of money as a deficiency balance. When a car is repossessed and sold at auction, the finance company applies the money it receives at the sale to the balance owed on your loan. If the vehicle sells for less than what you owe, you may be left owing the difference.

As I mentioned, I expect your finance company will work with you to bring this loan current, but if they will not, you should explore all options to borrow the money to bring the loan current, since a deficiency balance can be a huge financial burden.

If you absolutely cannot afford to pay for the vehicle, consider voluntary repossession as a lower-cost alternative to involuntary repossession.

I wish you the best of luck in resolving this problem, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com

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Comments (46)


Lisa H.
Sanford, NC  |  January 11, 2011
My divorce settlement stated that my ex-husband would be responsible for the debt on the car he drove, despite the fact that the car was financed/titled in my name. He stopped making payments and the car was repossessed. He settled with the bank for an amount less than what was owed. I am trying to refinance my mortgage (and would benefit from a higher credit score)and have been told by the lender that I could possibly contact the bank and speak with a supervisor to see if they would be willing to remove the account from my report if I provided them with copy of the divorce settlement. The car loan was through Bank of America. First, have other people been successful with this and second, what department would I need to contact? I envision having to explain my situation to a number of customer service reps before getting to who I need to speak to. Or would it be best to write the bank? Would really love to fix my credit score if possible. Thanks!
Bills.com
January 11, 2011
While you can try contacting B of A to request that you no longer have the car repo show on your credit, it is up to the creditor to decide to honor your request or not. I have no guide for judging the likelihood of your success. Even though your divorce decree stated that the debt is your ex's responsibility, that does not mean that the creditor is bound by you and your ex's agreement to divide community assets and debts. The creditor may consider you equally responsible, even if you were not pursued to collect on the debt, and be unwilling to remove the account from your records. I think it will take time and patience to call and find the right person to speak with, but I think phoning is likelier to get you somewhere than writing. Have you looked at the steps you can take to improve your credit score?
Joe B.
October 26, 2010
A friend of mine son lost his job over a year and a half ago, and is about that far behind in his car payment. The dealer closed that location, and has not had any contact with the finance company. How can he find out who to call to turn the car in to? After it is turned in, what will happen as far as the balance? From what I have read in other posts, I assume it would be auctioned off, that would be applied to the balance, and he would have to find a way to pay the rest? Is there any leagal action that the finance company can/will take?
Bills.com
October 26, 2010
The finance company would be a great place to start. A less accurate information source to learn current creditors is a consumer's credit report. A repossessed vehicle will be sold at auction, and any deficiency balance is the responsibility of the borrower. The creditor has the right to collect the deficiency balance from the borrower, including using the court system.
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Bills.com
July 16, 2010
A) Yes. B) No, unless you are in financial distress. The creditor may not be able to repossess the vehicle, but you still have personal liability for the loan. Negotiate a lump-sum settlement with the $8,500 you receive.
Jason .
July 16, 2010
I have a 2004 Passat. I paid the car off, but then used the car as collateral for an investment loan 3 years ago. The investment fell through, but to the point, I just got notice from my insurance company that the car is totalled after a flood here in Houston. The remaining balance on the investment loan is $14k. The insurance company will give me $8500 (after strong negotiating). A. Will the insurance company need the title to total it? B. Do you recommend defaulting on the loan? There is no longer collateral on the loan since the car is totalled. C. Everyone has their own sob stories, but my wife left me when I moved down here, I now have child support payments (.47 on the dollar of net pay), and have no money to pay off the rest of the loan. I'm working at with great income, but my sister messed up my credit when I cosigned with her on her car and she is in repossession.
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Bills.com
February 18, 2010
I am not aware of any statute of limitations on a secured debt, which is what a title loan is. Readers, please reply below if California has an exception for vehicle title loans.
Tenna .
February 18, 2010
Can you tell me if there is a Statutes of limitations on a Auto Title loan in California? And if so what it is? I've been looking around online for this information. I'm sure I am looking in the wrong spot.. If you can help that would be great!
Alicia .
January 27, 2010
Thank you Bill for your quick response. I am living in the state of NY. It has been about 2yrs since the Chapter 13 case was dismissed and have not yet proceeded to Chapt 7 status because I am still unemployed. I will take your advice and contact an attorney. Alicia
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Bills.com
January 27, 2010
It is difficult for me to offer a useful answer because you did not include your state of residence in your message. You also did not include the status of your Chapter 13, and if it is now a Chapter 7 due to your loss of income. Regarding the vehicle title, you may be able to obtain what some states call a "bonded title" for vehicle the creditor has abandoned. I urge you to consult with an attorney (your bankruptcy attorney would be a good person to consult) before undertaking this procedure. Alternatively, ask the finance company for the procedure. However, before taking any action of this magnitude consult with your attorney first.
Alicia .
January 27, 2010
My dilemma is that I was not able to afford my car payment so I filed Ch. 13 -debt consolidation in order to get on track with my bills. I since then lost my job and called my finance company to return the vehicle and they said they don't want it back and that it was tied up in litigation, also I have not received any correspondence from them since I bought the car. The last time I spoke with them was in Dec. 09. I don't know what to do. It has been sitting in my driveway for the past 2 yrs not registered or being driven and they have not picked it up. What do I do with it? I would like to sell the vehicle but I lost the title and the finance company also refuses to give me a copy.
Sheri .
January 20, 2010
thank you for your advice, i think i might have to do that until these auto loans are paid in full. also my credit score is only showing 530 due to the surrender of the 1 truck.if i would of known someone was gonna steal my truck i would of never gave up the other one now i am paying for 2 trucks i no longer have, because i dont want it to affect me later on in life.
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