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Advice on Borrower Liability after Vehicle Repossession

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Mark Cappel
UpdatedMay 27, 2024

Will I still owe money to my loan company, if I return my truck to them?

I have a truck I used for work. I have no more use for the truck and can't afford to finish paying for it. I want to turn it back for repossession. Is there anything that the loan company can do to me, like come after more money after they sell it. I still owe about $18,000 on this truck with 518,000 miles on it.

When a vehicle is repossessed (through a voluntary surrender or otherwise), the lender will usually sell the vehicle at auction, and then apply the money received at auction to the balance owed on your auto loan. If the lender receives less money at the auction then you still owe on the vehicle (as often the case). The difference is called a deficiency balance. Generally speaking, you would be liable to the creditor for the deficiency balance, which means you will probably still owe money to the creditor even though you no longer have the vehicle. The creditor may be willing to negotiate a repayment plan or lump-sum settlement with you to repay the deficiency, but if you fail to make arrangements with the creditor, the creditor could sue you to obtain a judgment against you, which could result in wage garnishment, a lien on your property, and/or bank levies, depending on the laws in your state.

Because deficiency balances on automobile loans can cause a significant financial hardship and have a strong negative impact on your credit score, you should work diligently to prevent the vehicle from being repossessed, if at all possible.

Keep in mind that most lenders do not want your car, they want the money, so first contact your creditor to discuss payment options, such as deferral of payments. If the lender will not work with you, you may want to look for ways to borrow the money needed or, if possible, to refinance the loan. (Most lenders won't refinance their own auto loans, so don't be discouraged by your original lender's refusal to do so. Typically auto-refinancing is done through a different lender, using the new loan to pay off the original loan.)

If you cannot borrow the money to repay your missed payments, or if you cannot afford to continue making your regular monthly payments, you may have no choice but to allow the car to be repossessed. In that case, you should contact an attorney to discuss the laws in your state regarding the collection of deficiency balances, and what options are available to you to resolve the debt.

Finally, you can visit the Auto Loans Information page and Refinance Car Loans page for more information on auto loans and refinancing. You can also used the site's Saving Center tool to apply for a free loan quote from a pre-approve lender.

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



Dealing with debt

If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q1 2024 was $17.69 trillion. Student loan debt was $1.60 trillion and credit card debt was $1.12 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Each state has its rate of delinquency and share of debts in collections. For example, in South Dakota credit card delinquency rate was 2%, and the median credit card debt was $419.

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.



BBill, Sep, 2009
You may or may not be able to do as you suggest depending on the recency of the bankruptcy. Contact your bankruptcy attorney to learn if you can reopen the bankruptcy and add the vehicle to the filing.
DDan, Sep, 2009
After filing for BK, I continued paying Travis CU on a vehicle named in the BK for a number of months. Being unable to maintain payments, due to the economic downturn, the vehicle was repossessed. How do I release liability on that vehicle?