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Information on paying off a balance on voluntary repossession

Do I have to sign form that I will pay remaining balance on a voluntary repossession?

Do I have to sign form that I will pay remaining balance on a voluntary repossession?

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Bill's Answer
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In most cases, you are not legally required to sign any document agreeing to pay the remaining balance of the auto loan after repossession. You may be legally liable for any debt still owed after the vehicle is sold, and the creditor may be able to sue you to obtain a judgment for the amount owed; signing a statement admitting to owing the debt will likely only make it easier for the creditor to collect it from you through legal action. Generally speaking, I recommend to consumers who find themselves unable to continue paying their vehicle that they return the car to the bank who financed the loan, or to the dealership which arranged financing, leaving a note explaining that they are unable to make future payments and that they are therefore returning the collateral. Signing a statement obligating you to repay the remaining balance of the note may cause you problems in the future if you find that you need to file bankruptcy or take other action to resolve this debt.

Before taking any action regarding this vehicle, I encourage you to consult with a qualified attorney in your area to discuss your state's laws relating to automobile deficiency balances (the amount owed after the repossessed vehicle is sold at auction). Laws vary from state to state regarding how finance companies may collect on deficiency balances, and how much they can collect, so it is important that you discuss your situation with an attorney to make sure that you are not being asked to pay money that you are not legally required to pay.

Deficiency balance

Even if you surrender your vehicle to your lender voluntarily, the lender has the legal right to collect on any balance remaining on the debt after the car is sold at auction. This type of debt is referred to as a "deficiency balance." The creditor may even file a lawsuit against you to collect on the unpaid deficiency balance. You should therefore only proceed with a voluntary repossession if you truly cannot afford the loan, as you will likely still owe the lender a significant amount of money, even after you no longer have the use and benefit of the property.

A deficiency balance is an unsecured debt, which the law treats the same as credit card debt, a payday loan, or medical debt, among other consumer debts. To see your rights and options for resolving the deficiency balance, read "Collections Advice."

I wish you the best of luck in resolving the difficulties you are facing with your vehicle, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.Bills.com

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65 Comments

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  • 35x35
    May, 2018

    If we let the bank know that we will pay let's say 25 dollars a month until we pay off the balance of a voluntary vehicle surrender sold at auction do they have to accept?

    0 Votes

    • 35x35
      May, 2018
      Daniel

      Whether they choose to accept it or not, making a token payment outside of a written agreement with the creditor does not protect you from lawsuit and potential wage garnishment or bank levy.

      0 Votes

  • JD
    May, 2014
    jeremy
    Houston, TX
    I bought a vehicle. I had it about a year and a half. I was current on my payments. Never late. I totaled the vehicle in a one-car accident. I didn't have gap insurance and I had let my insurance lapse. The amount delinquent is around $13k. I'm unable to pay the money back. I'd like to know what my options are, and what will more than likely happen because I can't make payments?
    0 Votes

    • BA
      May, 2014
      Bill
      You indicated you reside in Texas. See the Bills.com article Texas Collection Laws to understand your rights and liabilities as a Texas resident. Read the article I just mentioned carefully, and then ask any follow-up questions you may have on that page.

      What will more than likely happen? It is impossible to predict how one particular original creditor or collection agent will act if a consumer does not pay a debt. Some have aggressive collections policies and will sue every consumer who does not agree to their payment demands. Others have a case-by-case approach to aggressive tactics. Others never sue, and instead try to collect, then give up and sell the account to a collection agent. Who knows how your original creditor or collection agent will act?

      It is to your advantage that Texas has strong wage protections, so a creditor like this can't garnish your wages, even if it gets a judgement, in all likelihood. This increases your leverage in negotiating a settlement with them.
      0 Votes

  • SF
    May, 2014
    Sarah
    Frederic, MI
    I had bought a 2008 Chevy Equinox in August of 2013 and I paid all my payments until I got behind due to ending a relationship and having to get a place and when it came down to having a house or a car the house won. I recently received a letter stating that if I didn't respond they would understand that the debt was valid. Two days after I received the letter from a lawyer my mother got a letter stating they took all the money from her account which I am on and it is her social security disability and left her balance zero. I dont know if this is legal with one they said I had a month from the date and it was only 5 days after the letter was sent. Also it was her social security and I am only on the account because she is very sick. Any answers would be extremely helpful.
    0 Votes

    • BA
      May, 2014
      Bill
      It is possible your vehicle finance company violated Section 207 of the Social Security Act (42 U.S.C. 407) when it emptied the joint bank account containing your mother's Social Security benefits. See the Bills.com article Social Security Benefit Garnishment Rules to learn more.

      Contact the bank now and explain it allowed a levy/account garnishment of Social Security funds. It may put a temporary or permanent hold on the levy.

      Consult with a lawyer who has consumer law experience immediately. You indicated you reside in Michigan. If you cannot afford a lawyer, contact a Michigan pro bono program to find no-cost legal services.
      1 Votes

  • JF
    Mar, 2014
    Jay
    Roanoke, VA
    I bought a 2013 Chevy for $21,000 and my car note is $550 a month. I already made 6 payments on it ($3,300). I can no longer make payments on it at all. I am already 2 months behind. My car has not been repod. What is the best thing I can do I'm my situation?
    0 Votes

    • BA
      Mar, 2014
      Bill
      You have limited options. You can:
      1. Try speaking with your lender, to see if there is any way to rework the loan.
      2. Choose to do a voluntary repossession. You will end up responsible for the deficiency balance, after the car is auctioned, but a voluntary repo can protect you from costs associated with an involuntary repo.
      3. Try to find a way to catch up on your arrears, then sell the car yourself. That would require you coming up with the difference between what the car sells for and what you owe. The reason to try this is that you're likelier to get a higher price selling the car than the price it will garner when it goes to auction, leaving you owing less money.
      0 Votes

  • SS
    Mar, 2014
    Shay
    Irving, TX
    I bought a car in January. My first payment was in Feb. I called to do a voluntary repossession because my mother lost her job. Now, I have to pay most of the bills at home and I wont have any enough funds to pay my car payment (due to the changed circumstances). They told me i can get an extension so I can think about "if I want to turn in the car." My payment is this month and I still don't have the enough funds to pay the amount owed. If I call them again and do a voluntary repossession what will happen next? What if I don't have the sufficient funds to pay whatever is left of the loan after auction? Can i go to jail? Do they have the right to take money out of my check? Can they do that? Or will they be bombarding me with calls until I make a payment? Please help.
    0 Votes

    • BA
      Mar, 2014
      Bill
      All great questions. You indicated you reside in Texas. Please read the Bills.com article Learn Texas's Rules For Garnishment, Liens, and Foreclosure to understand what may happen if you do not pay deficiency balance. Please ask any follow-up questions you may have about collections on that page.
      0 Votes

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