Voluntary Car Repossession
Have you fallen behind on your car payments? Or has a late payment caused additional fees you are unable to pay? You, among many others, have an outstanding balance that led to more interest, thus resulting in severe credit damage. When the odds feel stacked against you, and the loan amount gradually increases to an amount you cannot keep up with or that your personal finance allows, failure to pay towards a remaining loan balance can have serious repercussions. It might be time to consider voluntary repossession.
When the loan agreement becomes too much, people will sometimes voluntarily surrender their rights to a service provider to avoid further legal actions from the lender. Voluntary repossession occurs when a person willingly returns possession of the lender item. If you’re struggling with your finances and you fear repossession, speak with O’Bryan Law Offices today to explore your options. To schedule a free consultation with us, please call 502-339-0222 today.
What is Voluntary Repossession?
Voluntary repossession is another way of stating that an individual returns the personal property on which they have missed payments or failed to make monthly payments to avoid repossession. When car loan payments cease to continue throughout the duration of the auto loan agreement or failure of loan terms, an individual becomes at risk of the lender involving the credit bureaus and collection agency.
For a person dealing with the devastating challenges of vehicle repossession, the situation can often leave an individual feeling embarrassed and overwhelmed at times. However, voluntary repossession can often provide a better outcome than repossession agents coming out to your home, work, or any other place to retrieve the unpaid property by any means necessary. To learn more about repossession, read our related blog: Can a Repo Man Move Another Car to Get to Yours?
How Does a Voluntary Repossession Work?
When an individual’s status for an auto loan turns into default, they become at risk of vehicle repossession. The loan terms will often provide the lender security interest within the vehicle itself.
What this means for a lender is they may claim the vehicle without notice if the person receiving the car loan:
- Failure to make monthly payments
- Missed payments, whether payment schedule or late payments
- Failure to provide insurance for the vehicle
If you need assistance in a voluntary repossession, start by contacting the lender to make them aware of the situation. Let the lender know that you are unable to continue to follow through with the arranged loan agreement. Depending on the lender, there’s a possibility they could provide a payment plan with additional fees tacked on, with the means to offer a repayment plan for the missed payments.
However, if the lender should choose to not provide the borrower a higher interest rate instead, a voluntary repossession discussion is made. The conference will likely include the borrower and the lender making plans involving the vehicle return and its current status. Once the arrangements are finalized, voluntary repossession will take place.
How Does Voluntary Repossession Affect Your Finances?
The thought of favorable treatment for an individual who goes the extra mile to provide the collection agency the hassle of finding the location, repossessing the vehicle, and what one would think for saving a debtor a lot of trouble would get a person. However, voluntary surrender doesn’t always get the credit one would think.
For instance, say an individual falls behind on their auto loan monthly payments, and to avoid having the car repossessed, they voluntarily surrender the car. However, in doing so, the lender may still seek a return for the remaining balance you still owe, thus causing the voluntary repossession to affect your credit report and potentially affecting your future ability to get an auto loan.
You May Still Owe Money
Unfortunately, you may still owe the remaining auto loan balance even after voluntary repossession. The lender sells, hoping to recover as much of the auto loan as possible. You’ll be responsible for most fees to help cover sale costs, including prepayment fees. In addition, to the financial consequence of late payments, the auto lender will also ensure you’re responsible for paying any late-fee-charges.
Failure to make payments on the fees or other balances resulting from the voluntary surrender of the vehicle could result in the lender turning your account over to a collection agency. Once collectors are involved, you can expect your credit score to reflect this incident for up to seven years on your credit reports. When something affects your credit, credit report, or credit history, future lenders worry about doing business with you.
A Voluntary Repossession Will Show On Your Credit Report
According to major credit bureaus, a credit report will show a voluntary repossession. Credit reports also show the financial institution where the deficiency balance occurred, credit reporting of credit repair, and any collection agency that has reported your financial consequences over a significant period. However, instead of “repossessions,” a credit report would read “voluntary surrender,” which could be less damage than a repossessed car would to a credit score.
How Long Does a Voluntary Repossession Stay on Your Credit History?
A voluntary repossession affects your credit report and can remain on your credit history for up to seven years. Those concerned with their credit score or who become severely impacted by this should know their credit score will likely increase within a few years. Voluntary repossession can offer the ability to request the lender to subside in reporting missed payments, giving you the option to choose voluntary repossession instead of the vehicle repossession route.
It Could Affect Your Future Ability to Get an Auto Loan
When a person suffers from a poor credit report, low credit scores, or previously worked towards credit repair; an additional voluntary repo could affect your future ability to get an auto loan. For example, if you once could not make your regular car payments, involuntary repossession, or voluntary car repossession occurred, approval odds of a new car loan may be out of the question.
However, a lower interest rate may be improbable for a lender willing to provide new loan terms with a payment plan. For those who have previously had late payments, a failed loan, or less than average credit scores, a lender willing to take a risk on you defaulting on an auto loan will only do so if a high-interest rate is involved.
Alternatives to Voluntary Repossession
The Louisville Bankruptcy Attorneys at O’Bryan Law Offices understand that a voluntary repo can be devastating. Our lawyers want to work with you on your options for the remaining balance on your car loan. With guidance and a party fighting for your family’s financial protection, our law firm may benefit your family from the debt you may owe. When your credit score has negatively impacted your life, and the credit bureaus and third-party advertisers offer no assistance, call for a free NO-credit card needed, consultation with the O’Bryan attorneys.
Most states require notice by lenders who intend to take action when payments are not received. Once a lender has notified you, don’t wait to take action for yourself. Waiting to see if a lender will take action is time that is better spent making alternatives to the voluntary repo. While there’s still time, negotiate a better deal for lower car payments, try finding a better price on your own, or file for bankruptcy. But most importantly, speak with an experienced lawyer. An O’Bryan lawyer will likely save you time, further frustrations, and even sometimes tips for payment plan investments on your remaining loan balance.
Negotiate a Better Deal for Lower Car Payments
When it comes to asking for a better deal for lower vehicle payments, speaking with your creditor could potentially be better to negotiate as opposed to voluntary car repossession. Explain to your creditor the reasons behind your missed or late car payment and that the loan is not something you can continue at the current rate. Even try asking for paying only the actual value remaining balance for the vehicle.
Should a lower car payment present an opportunity in negotiation, wait before automatically agreeing to anything. To prevent the same unfortunate financial consequences or fear of the repo man from showing up to retrieve your means of transportation, first check your personal finance to ensure the negotiated deal is something you can make monthly payments regularly.
Find a Better Price on Your Own
Although you could not sell the vehicle without the title, independent research to find a better price on your car’s current value is not restricted. Individuals can use educational materials and tools like Kelly Blue Book to determine their car’s current value and the resale value. While gathering information, search for potential buyers looking in a price range above the KBB value for your current ride.
Finding a potential buyer looking to pay above the vehicle’s current value may also be a useful bargaining chip. Finding a buyer not only saves the lender the hassle of the third-party advertisers’ fees but also takes some of the burdens off your plate. Any loan amount someone else can pay on your behalf helps when you’re behind on your car note.
Some feel bankruptcy offers the best price for getting “out” of your current financial dilemma. Those considering filing for bankruptcy have two options to help with the voluntary repo of their vehicle:
O’Bryan Law Offices will help you determine which chapter will best support your unique case. Through a free consultation, our lawyers will discuss the factors surrounding your case and select an appropriate category for the bankruptcy filing. All information discussed throughout our attorney-client relationship is confidential and provided in your best interest.
How Chapter 7 Bankruptcy Can Help With Voluntary Repossessions
Chapter 7 bankruptcy can help if the vehicle is voluntarily surrendered to the lender. When the vehicle is returned, if an individual is in Chapter 7 bankruptcy, this will eliminate the debt. Therefore, any remaining amount due becomes unsecured debt.
A debt with no ties or security by a physical asset is known as unsecured debt. When in Chapter 7 Bankruptcy, any unsecured debt that remains exempts a lender from being able to retrieve the item back. For example, In chapter 7, bankruptcy, credit card debt items cannot be seized if you fail to make payments; however, the credit card company may still sue you.
How Chapter 13 Bankruptcy Can Help with Voluntary Repossessions
Chapter 13 bankruptcy potentially has a few more options to help with voluntary repos. For starters, this chapter offers a cramdown, meaning you would pay only the actual value of the car instead of the full loan, which can avoid fees tacked onto the auto loan. However, a cramdown doesn’t just simply clear the slate for the loan terms that went unpaid. The unsecured debt that remains in Chapter 13 bankruptcy will be distributed once the repayment plan has been fulfilled.
Another reason an individual filing for Chapter 13 bankruptcy should seek advice from a lawyer before filing is due to the misinformation regarding voluntary repossessions. For instance, an individual in this chapter of bankruptcy who voluntarily surrenders the vehicle will still owe money, and the amount of money the bankruptcy will help with is only a tiny amount. However, the advantages could be that you can keep the vehicle and make adjustments within your bills to make them a payable range that brings you more comfort.
An individual filing for Chapter 13 bankruptcy should consult with an experienced lawyer first. Given this complex chapter of bankruptcy has many angles of both pros and cons, knowing which chapter will work best for your unique situation is something the O’Bryan attorneys can determine.
Louisville Bankruptcy Lawyers Can Help with Repossessions
The Louisville bankruptcy lawyers can help with repossessions. Our attorneys can guide you throughout the process of your options to consider a voluntary repossession. Our law firm can help explain reasons that may benefit you and the opposite to shield you from things that may cause further wage garnishment. If you or a loved one are struggling to make your monthly car payment, unable to fulfill a loan agreement, or have had your car repossessed and are unsure where to go from here, the O’Bryan attorneys are here for you.