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All About Voluntary Repossession

What is the difference between a voluntary repossession and one where the vehicle is snatched by a repossession person from the auto or home lender?

What is the meaning of a voluntary repossession? Also, which affects your credit report more; a voluntary repo or a regular repo?  And, is voluntary repossession only for autos or are there home voluntary repossessions too?

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Repossession
Highlights

  • Learn the differences between a voluntary repossession and standard repossession.
  • Understand your responsibilities regarding a deficiency balance you will owe.
  • Get help with your debt if you cannot manage the debt payoff on your own.

Repossession is where a creditor holding the title to property takes possession of the property from the debtor. It is typically related to an automobile repossession, but can also apply to any asset and there is such a thing as a voluntary house repossession.

What is Voluntary Repossession?

"Voluntary repossession" is a term used to describe a situation in which a consumer voluntarily surrenders the property securing a loan, such as an automobile, to the lender that financed the purchase. Voluntary repossessions generally occur when a consumer has fallen behind on his or her loan payments, and decides to surrender the property rather than forcing the creditor to proceed with repossession. Voluntary repossessions occur most frequently with vehicles, but can occur with any type of secured loan, such as the purchase of work equipment, jewelry, etc.

Quick tip

Struggling with a deficiency balance debt? Contact one of Bills.com’s pre-screened debt providers for a free, no-hassle debt relief quote.

Now, onto to your questions about voluntary repossession. To voluntarily surrender your automobile or other property to the lender that financed its purchase, you would first need to contact the creditor to explain the fact that you can no longer afford your monthly payments, and that you wish to surrender the property. At that point, the lender will likely provide you with a location at which you can safely turn over the property, and tell you any details you need to know about its procedures for processing voluntary repossessions.

Do not be surprised if your creditor is resistant to your request to voluntarily surrender your vehicle; the lender will likely try to work with you to figure out a way for you to keep the loan current and retain the property. These efforts may actually help you in figuring out a way to maintain the loan. However, if you are sure that you cannot afford the loan payments, voluntarily surrendering your vehicle can be a reasonable choice.

How does a voluntary repossession compare to a standard repossession?

In regard to your credit, both a voluntary repossession and a standard repossession have the same effect on your credit rating. They will both appear as repossessions, and will both result in a significant negative mark on your credit history. Under the FCRA, a repossession will appear on a credit report for 7 years from the date of first delinquency. You will likely see your credit score drop substantially, as having a repossession in your credit history marks you as a credit risk. 

However, if you truly cannot afford your car payments and are falling behind, it is likely that your vehicle will be forcefully repossessed if you do not take the initiative to surrender it first. The primary benefit of a voluntary repossession is that the costs associated with the process tend to be significantly less than those associated with a forced repossession, which could save you a lot of money as you work to pay off the remaining balance of the debt.

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."

For more information about credit and credit scoring, I encourage you to visit the credit help page. In addition, Bills.com offers a wealth of information for consumers struggling with their debts, available on the debt help page.

I wish you the best of luck in resolving your financial difficulties.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Get Debt Help!
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426 Comments

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  • CH
    Nov, 2018
    Chris

    I did a voluntary repo in a chapter 7/13 bankruptcy. That was about 4-5 years ago and they still have not come to get the utility trailer. Can I sell it?

    0 Votes

    • 35x35
      Nov, 2018
      Daniel

      To get legal advice, consult an attorney. I will share my thoughts, with the understanding that it isn't legal advice. 

       

      To sell a trailer, you need to have title to it. If you don't, then you can't transfer ownership to the buyer and the buyer could not register the trailer. 

      I recommend contacting the lender again. Ask the lender to pick up the trailer or to put in writing that they are not going to do so. When you call them, ask to whom you can send a letter about the subject and follow up with a letter that states that they need to pick up the trailer with a set time frame (45 days for example). Send the letter in a way that you can prove it was received and save a copy of of the letter and the delivery confirmation. If you get no answer, apply for an abandoned vehicle title, bringing proof of the history of the voluntary repo and your attempts to address the matter.

      Please report back here on how things go, so other readers can learn from your experience.

      1 Votes

  • LL
    Apr, 2017
    Lori
    I am disabled and am going to have to voluntarily repo my car.. I am trying to find out tho, if they can still come after me for the remaining balance in the state of Indiana?? Any help?? Thank you!!
    0 Votes

    • 35x35
      Apr, 2017
      Daniel

      Yes, you can face collections for the deficiency balance. Your income and assets are protected according to the collection law exemptions for Indiana.

      0 Votes

    • 35x35
      Apr, 2017
      Daniel

      Please allow me to add that your disability income may be exempt from collection by this type of creditor.

      0 Votes

  • KJ
    Mar, 2017
    kevin
    I can no longer afford insurance on my car so I have no choice but to voluntarily surrender my car. I am still able to make the payments can I be sued
    0 Votes

    • 35x35
      Apr, 2017
      Daniel

      If you turn in a car, then it will be auctioned off and the proceeds applied to your balance, less some fees for the auction process. The remaining debt, called the deficiency balance is your responsibility. If the creditor can't collect it from you, the creditor could sue you.

      What about re-registering the car as non-operative, eliminating the need for insurance? Make the payments until you can afford to resume the insurance payments.

      0 Votes

  • CS
    Dec, 2015
    Cole

    I purchased a vehicle from a buy here pay here, made payments on it, on time, for 1 year. The car needed repairs that would cost more than the value of the car. I called and spoke to customer support, told them to come get it. They asked if they could help. I told them the terms, they said "no". They had another rep speak to me, same thing. I then got a call from the manager. He said "no", as well. Two week later they finally came with a tow truck. I"ve since tried to apply for car loans and each car lot says that the buy here pay here is still showing up on my credit report as "late payments". I checked with TransUnion and it's showing that I had the car for 3 years! I have not seen or heard from the company regarding what they have done with the car whether they burned it or sold it, and for how much. Isn't all this false reporting to the credit companies and am I able to sue for this? I can't tell you how much it has crippled my credit by staying on there for almost 5 years. I checked my bank documents and sure enough, I stopped making payments on it when I called them, which was one year after I got it. Thank you.

    0 Votes

    • 35x35
      Dec, 2015
      Daniel

      You need to speak with a lawyer. It could be the case that you owe the balance of the loan from the time you stopped making payments, less any amount for which they sold the car (which may be next to nothing if it wasn't working).

      Unless you have something in writing stating otherwise, you essentially did a voluntary repo, which would harm your credit and leave you on the hook for any balance still owing.

      Speaking with a lawyer will help you get to the bottom of this, whether you face collections or have a case against the car dealer.

      0 Votes

  • NR
    Oct, 2015
    Nicole

    Husband and I signed as guarantors on a business loan for business equipment. The loan does not show up on our credit but under the business credit. One piece we lease financed (lease purchase) was a pneumatic trailer. Bad timing because oil fields shut down and no one is using them. We've still been making payments but it's hurting us. We want to to a voluntary repo but they keep threatening us about our credit. The original price was $38K but lease financed if for 4 years at $1600 mthly. HORRIBLE DEAL! But we were talked into it. So if we repo it and they sell it are they trying to recoup the remainder of the lease (like from $80k!) or the value of the trailer ($38k)?? They aren't trying to work with us or give us any information.

    0 Votes

    • 35x35
      Oct, 2015
      Daniel

      Unfortunately, if you do a voluntary repossession you are on the hook for the outstanding loan balance, less the sale price of the trailer. When it is auctioned, it could go for less than it is worth, putting you in an even rougher spot. There may also be fees added on, though fees are lower in a voluntary repo than if they come and repossess the trailer.

      The voluntary repo could also hit your personal credit, especially if it goes to collection. I am not certain that it would stay associated only with your business credit. If you have personal liability, it very well could appear on your personal credit if you go to collections or are sued and a judgment is entered against you.

      Keep trying to work something out with the lender. Also, I recommend seeking a free consultation with a bankruptcy attorney. I am not suggesting that you file for bankruptcy, but a consultation will review what steps the creditor could take, what income and assets are at risk. If bankruptcy would offer some protection, even if you don't file but could, that can swing the leverage in negotiating something with your creditor.

      0 Votes

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