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Advice on Motorcycle Repossession

I have a motorcycle that I do not use and can't afford. Is it better if I surrender it voluntarily?

I bought a motorcycle last year at the advice of a now-ex-boyfriend. I had never ridden before, but thought I could learn to ride. A year later I have realized its too much for me. I have tried to sale it but the blue-book value is only $7500. I owe $13,000 (15.75% interest rate/ for 6 years/$300 a month). I am 28 and in college working on my undergraduate degree. I am on Social Security disability and work a part-time job, while going to school full-time. I can not afford to keep making the payments plus insurance if I can not ride it. My credit score is only 590 because of credit card charge-offs from 2002. If I stopped paying the note and the bank foreclosed on the motorcycle, what could I expect to happen to my credit? What should I do?

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Bill's Answer
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Any repossession is generally considered a strongly negative mark on a consumer’s credit profile, and will usually lower his or her credit rating significantly. However, given the fact that your credit rating has already dropped to 590 due to past financial difficulties, this repossession may not cause a large drop in your credit rating. Had your credit score been an 800, I would have expected a significant drop after this repossession, but since your credit rating has already been damaged by other delinquent accounts, the impact of this repossession will likely be less severe, relatively speaking.

However, since the credit card debts that were charged off were already six years old, their negative impact on your credit rating would have ended within a year; derogatory credit listings fall off of your credit report seven years from the date of charge off. Had this repossession not occurred, your credit rating may have started to improve once these credit card debts began to fall off your report; unfortunately, the repossession means that you will likely be facing an uphill battle in obtaining reasonably priced credit for several years to come. For more information about credit, credit scoring, and credit reports, I encourage you to visit the Bills.com credit resources page.

Motorcycle Repossession & Credit Report

While it is likely that the repossession of your motorcycle will cause you some credit problems in the future, you should probably be more concerned about the possibility of the lender attempting to collect a deficiency balance on this obligation once the repossession is complete and the vehicle has been sold. See the Bills.com article Effects of Bankruptcy, Foreclosure, Maxing-Out a Credit Card, and Debt Settlement On a Credit Score to see how delinquencies and other negative events harm a FICO score.

Deficiency Balance

When a vehicle is repossessed, the lender generally sells the property at auction. The lender would then apply the money it received at auction to the balance owed on the actual loan. If the auction proceeds are insufficient to cover the balance of the note, the borrower can be held liable for the difference, which is called a deficiency balance. A bank can collect on a deficiency balance just like any other unsecured debt (like credit cards, personal loans, etc.).

In a worst case scenario, the lender could sue you for the unpaid deficiency balance; if the court grants the creditor a judgment against you, it can work to enforce the judgment as allowed by your state’s laws, which may include wage garnishment, bank levies, property liens, etc.

In this case, since you are a student and your primary source of income is Social Security, the lender may have a hard time forcing you to pay any deficiency balance. If this lender starts trying to collect on a deficiency balance against you, I strongly encourage you to consult with an attorney in your area to discuss the potential consequences if you are unable to pay the debt. See Can a Creditor Garnish Social Security? to learn more about this subject.

Bankruptcy & Deficiency Balance

Many consumers whose vehicles are repossessed find that filing bankruptcy can help solve their financial problems. Visit the Bills.com bankruptcy information page to learn more about bankruptcy and the options available to you. In addition, if you are unable to file bankruptcy, a debt resolution program, such as debt settlement, may be able to help you negotiate a settlement with you creditor.

To learn more about bankruptcy alternatives, visit the Bills.com debt help page. If you think bankruptcy may be a solution to your financial problems, consult with a bankruptcy lawyer to discuss the benefits and drawbacks of bankruptcy and how it may affect your financial situation.

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

Best,

Bill

Bills.com

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  • J
    Joe,
    Sep, 2020

    I just financed a 2020 gsxr 1000r I tried to get full coverage but they want way to much. I can’t afford it look around and nothing never thought they would want 1000 a month on insurance wNt to turn in bike. Called finance company but they said just make payments and just get liability. Is this true don’t want them coming later taking bike

    • 35x35
      Daniel,
      Sep, 2020

      Joe, $1,000 a month is steep. How much is the bike worth?

      If the laws of your state are followed for minimum coverage and there is no requirement from the lender that you have other coverage in place then you can just get liability. Just be super careful, as any damage from a collision will not be covered.

      I imagine you will get an insurance quote before you commit to a vehicle purchase in the future.

  • B
    Brandon,
    Dec, 2019

    I bought a 2019 Harley Davidson last year and I still owe $26,000 if I stop making payments will I still have to pay something after they reposes the bike? I don’t mind the credit hit

    • 35x35
      Daniel,
      Dec, 2019

      The credit hit is only one part of the picture. You remain responsible for the loan balance. The bike will be auctioned and the proceeds applied to the balance you owe, less any charges associated with the repossession and auction. The debt that remains is called a "deficiency balance." Expect to recieve collection calls and potentially be sued for the balance.

  • CK
    Clark,
    Phoenix, AZ,
    Aug, 2013
    I used a Suzuki card to purchase a motorcycle in Oct 2009. Following a financial hardship i stopped making payments Mar 2010. Collection agencies have unsuccessfully tried to repossess the bike a couple of times. I still have the bike and havnt heard from them in a couple years. Does the 7 year rule apply to this type of situation. Meaning, will this collections be removed from my credit report after 7 years? Its considered an unsecured revolving credit card yet, I do not have the title. If this was removed from credit report, could they still repossess the bike? Would i be able to get the title somehow?
    • BA
      Bill,
      Aug, 2013
      Let me share a little background information before answering your question directly. Whether a debt appears on your credit report does not determine if a lender has the legal right to collect a debt. A credit report is not a legal ledger where all of a consumer's debts appear, and if they don't appear they don't exist. Debts and credit reports don't work that way. A credit report is a lot like a newspaper — we all know if an event is not written-up in a newspaper does not mean the event never took place. Once the credit report 7-year clock runs out, the account may not appear on your report, but that does not mean the debt is cancelled, forgiven, or is no longer collectable.

      On to your questions:
      1. The repossession will appear on your credit report for 7 years. The 7-year clock starts from the loan's original delinquency date. Let's use your facts. You stopped making payments in March 2010. That means this loan will appear on your credit report through March 2017.
      2. I would be surprised if you had no title to your Suzuki, especially if it's a road bike. If it is a road bike, go to your state's DMV office and get a replacement copy of the title. You will probably notice the title contains a line stating there's a lienholder, and the name of the lienholder. If your Suzuki is an OHV, then it is possible your state does not require the dealer to issue a title, but that is unlikely.
      3. Legally, I do not see how you can obtain a clear title to the bike without paying the balance due on the loan. However, it is possible your state has an adverse possession law that allows borrowers to obtain title to a vehicle after X years if the lender does not repossess it.

    Talk to a lawyer who has consumer law experience to learn more about your rights and liabilities. He or she will explain your state law regarding repossession, and if your state criminalized hindering a secured creditor from repossessing a vehicle.

  • SS
    Steve,
    Manhattan, KS,
    Jun, 2013
    I purchased a motorcycle in 2009 due to hardships I could not make payments. A year after I stopped making payment they wanted to repossess the motorcycle. I told them at the time I sold the bike and no longer had it. This wasn't the case I did have it. Later a collection company began to call and threaten me and wanted the bike. Again I told them I did not have it. After many months of calls I decided to come to grips with the reality I had to do something about this because it was killing my credit. I decided to take a settlement with the collection company. I paid them and now I am wondering how I can get the title release from HSBC Yamaha. Is this even possible since it was settle in a collection company?
    • BA
      Bill,
      Jun, 2013
      Each state handles a situation like yours slightly differently. The best solution, of course, is to contact HSBC and ask it to send a title release to your state's DMV. If it refuses to, contact your state's DMV and describe your situation. Again, depending on your state's laws, you may need to consult with a lawyer to file a motion with a local court to ask for an order to the DMV to issue a new title.
  • JZ
    john,
    Nov, 2012
    After 4 years, a repo guy came knocking on my uncle's door to pick up my bike. I had moved for over a year, and my bike and I were not there anymore but my mailing address is still there. My uncle told the guy I don't live there anymore. He told my uncle he'd keep coming back and look for the bike. He also told my uncle he'd call the police. At this point I'm clueless...well I was actually thinking of paying it off once I got my income tax cuz knowing that they'll auction it for so cheap and getting sued for deficiency balance seems to hard to accept (plus this is my first bike and I'm the kind of guy that's hard to let go). I remember 6 months or a year after I stop making payments on the bike, there was another collector knocked on the asking for the bike...but now ...after 3-4 years?
    • BA
      Bill,
      Nov, 2012
      A creditor's lien on a vehicle title does not have a statute of limitations. My advice? Call the collection agent and explain you want to negotiate a settlement on the debt you owe to avoid the expense of a repossession, auction, and attempted collection of the expected deficiency balance. Make sure that you get the settlement in writing, and that it includes a release of the lien on the title.
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