Vehicle Surrenders And Bankruptcy
When our clients are underwater on their vehicle purchase, bankruptcy can be a great solution. If the goal is to just let the vehicle go and get out from a bad loan, bankruptcy can take care of the loose ends.
Typically, when a vehicle is voluntarily surrendered to a lender, the vehicle is then sold or auctioned to a new buyer. A bill is sent for the difference between what the vehicle was sold for and your remaining balance of the loan. If a borrower is deeply underwater on a vehicle purchase, they could be stuck with a bill for thousands of dollars after the surrender. If a payment arrangement isn’t made that satisfies the lender, the borrower could potentially face a lawsuit or judgment for that remaining amount due.
Voluntary Surrender
If a vehicle is voluntarily surrendered in a bankruptcy, the process is far simpler. The borrower can indicate in the bankruptcy their intention is to let the vehicle go. Arrangements can be made to pick up the vehicle or drop off the vehicle at a dealership. When a vehicle is surrendered in a bankruptcy, it is not notated on your credit report as a surrender or repossession.
The borrower can decide if they want to preemptively surrender the vehicle prior to filing, or wait and let the bankruptcy take care of it. One benefit to surrendering the vehicle prior to filing is eliminating the additional vehicle expenses including insurance and saving those funds that would have been paid. However, some choose to keep the vehicle during the duration of the bankruptcy while they are making alternative transportation arrangements. The lender cannot pick up the vehicle during the bankruptcy without seeking permission from the court. Therefore, lenders most often wait until a bankruptcy case has been discharged and closed before seeking to pick up the vehicle.
Co-Signer
One additional factor may come into play when deciding to surrender a vehicle. If a co-signer was needed to purchase the vehicle, this could have an impact on them. When the vehicle is surrendered and sold, the co-signer can still be held responsible for the remaining balance.
For more information, please contact your Folsom bankruptcy attorney at 916-780-7005.
Categorized in: Loans
