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Information on paying off a balance on voluntary repossession

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UpdatedJul 15, 2024

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?

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.



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Dealing with debt

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Each state has its rate of delinquency and share of debts in collections. For example, in Texas credit card delinquency rate was 4%, and the median credit card debt was $438.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.



JJacki Cornell, Feb, 2023
We surrendered a vehicle in 2004. There was a deficiency balance we never paid. After 19 years without ever making a single payment, can any creditor sue us for that balance, or is there a statute of limitations?
VVeronica, May, 2021

I had a repossed vehicle in early 2000s. In 2008 I went to court and what I could afford was $200 a month, the balance was 9000. I paid until 2014 a total of $22000 towards this debt. I asked for my balance and ii was over 11k at that point. I sent them a fax to settle for a $1 and never heard back. 2021 I get a notice that the old collection agency is going to court to change names or ownership of that debt. I call the office and they tell me my balance is now at almost 50k. How do I get an answer as to what the balance is??

RRob, Oct, 2020

I purchased a 2018 Mitsubishi Outlander 2 years ago with an outrageous interest. In 2 years I have already paid 15,000 and still owe 23,000. The monthly note was 613.00 and if I continue to pay for another 4 years I would end up paying 40,000 for a car that's only worth 13,000. No other dealership will take it for a trade in because of too much negative equity. I called the lender who is in Atlanta and told them that I voluntarily surrender the vehicle and they tried to make me sign a form saying I will pay whatever the remaining balance is and I refused. They told me that they will not pick it up and I am not signing anything. I am in Texas and my apartment complex is threatening to have the car towed even tho it has current registration. I dropped insurance on it because I don't drive it anymore. My dad was the co signer and he is retired and barely making it on his social security. What can I do?

DDaniel Cohen, Oct, 2020

Rob, the information I share with you is not legal advice.

The first thing you should do (which I believe people who live in Texas do anyway) is be thankful you live in Texas. Texas has strong consumer protection laws when it comes to collecting on debts. Assuming the lender sues you and wins a judgment against you, the biggest risk in Texas is to your bank account. Any money in your account could be taken if the judgment-creditor figures out where you have your account.  Your father's Social Security has additional protections, so an amount equal to two months of his SS check are protected if held in the account which receives the monthly direct deposit.

The lender doesn't need you to sign anything to hold you responsible for the debt. I am guessing they are adding some term to their advantage in the paperwork they asked you to sign. The way things stand is that you and your dad are each 100% responsible for the debt. Both can be sued and be at risk for a bank garnishment. Given the size of the debt, I expect you will be sued. If so, it is sensible to avoid putting money into a bank account with your name on it.

There are many states that allow 25% of a person's income to be taken out of each check, after first subtracting state and federal income tax and your mandatory Social Security deduction. Think how crippling it is to take that kind of hit. If you move from Texas while the judgment is active, you could suffer a wage garnishment.

It is my opinion that you need to think about how you got into this situation. You realize now that the cost is excessive but you never should have taken the loan or gotten your father involved. That doesn't make you a bad person, but it gives you the opportunity to learn from this, so you make smarter money decisions in the future

AAnonymous, 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?

DDaniel Cohen, May, 2018

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.

jjeremy, May, 2014
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?
BBill, May, 2014
You indicated you reside in Texas. See the 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.
SSarah, May, 2014
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.
BBill, May, 2014
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 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.