topic Re: Is voluntary repossession viable in this case? in Auto Loans

Is voluntary repossession viable in this case?

Anonymous — Sat, 20 Aug 2016 18:58:58 GMT

So, I've gotten myself into a sticky situation. I'm in commision sales and things have been very slow for the last few months. I've been struggling and savings has been depleting pretty rapidly. Basically, from the time I was 18 until basically the last 6 months (5 total years) I built great credit. I used the VW College grad program to get my first car and made on time payments for 4 straight years and so I had a 710 credit score. Being foolish, I traded in my VW on an 2016 F150 in February of this year. I had good enogh credit I didn't have to verify income or put any money down, plus I rolled in 4k negative from the Jetta.

Basically where I'm at now is I consistently struggle to make the monthly payment of $750 and my insurance went up with the truck from the VW. (+$100/m).

I make $16.25/hr when I break down the math, so it was foolish to buy the truck at all and I understand that. My credit has dipped down to just barely above 600 because I've used CCs for bills and that kind of thing. My landlord is very fair and didn't check my credit when I moved in and said she isn't going to when it comes time to renew in October of this year, so I'm not worried about my living situation any time soon.

I owe $46,000 on the truck and valuations I've gotten put it at $35,000 in a perfect case. So I'm upside down probably $12k realistically. I can't get a loan for that difference I don't think and no one in my family is in a place to be able to lend that to me.

The only real positive is that I have a reliable working car with no loan, a 2005 Subuaru with a recently rebuilt engine. I'm really done with this truck loan payment as it's strangling me in every aspect of my life. I'm toying with the idea of voluntary repossession. I understand it really isn't that much better than a non-voluntary, but at this point I'm ready to do whatever it takes to get rid of that payment.

What is the best course of action in this case? Thanks!

Re: Is voluntary repossession viable in this case?

Anonymous — Sun, 21 Aug 2016 00:09:32 GMT

@Anonymous wrote:
So, I've gotten myself into a sticky situation. I'm in commision sales and things have been very slow for the last few months. I've been struggling and savings has been depleting pretty rapidly. Basically, from the time I was 18 until basically the last 6 months (5 total years) I built great credit. I used the VW College grad program to get my first car and made on time payments for 4 straight years and so I had a 710 credit score. Being foolish, I traded in my VW on an 2016 F150 in February of this year. I had good enogh credit I didn't have to verify income or put any money down, plus I rolled in 4k negative from the Jetta.

Basically where I'm at now is I consistently struggle to make the monthly payment of $750 and my insurance went up with the truck from the VW. (+$100/m).
I make $16.25/hr when I break down the math, so it was foolish to buy the truck at all and I understand that. My credit has dipped down to just barely above 600 because I've used CCs for bills and that kind of thing. My landlord is very fair and didn't check my credit when I moved in and said she isn't going to when it comes time to renew in October of this year, so I'm not worried about my living situation any time soon.

I owe $46,000 on the truck and valuations I've gotten put it at $35,000 in a perfect case. So I'm upside down probably $12k realistically. I can't get a loan for that difference I don't think and no one in my family is in a place to be able to lend that to me.

The only real positive is that I have a reliable working car with no loan, a 2005 Subuaru with a recently rebuilt engine. I'm really done with this truck loan payment as it's strangling me in every aspect of my life. I'm toying with the idea of voluntary repossession. I understand it really isn't that much better than a non-voluntary, but at this point I'm ready to do whatever it takes to get rid of that payment.

What is the best course of action in this case? Thanks!

Welcome to MF.

Yes, you are in a very difficult situation. Have you tried talking to the loan company and explained them your situation? I know most are unsympathetic but it cant hurt. Im not a bankruptcy expert but that might be something to look into as well if your vehicle isnt your only monetary issue. Putting that aside, a volutary repo as you said insnt any different than a forced one in term sof your credit. Thye will sell the vehicle at auction and then will come after you for the loan payoff and what they were able to sell it for. The repossession will stay on your credit for 7 years and in the meantime you will be dealing with collection agencies and the possibility that you will be sued for the balance difference. This can lead to your wages being attached , ect.

In the end if you absolutely have way to borrow the money from family or any other source the sooner you take the plunge and turn the vehicle in the sooner you can start at recovering. I wish you the best and good luck.

Re: Is voluntary repossession viable in this case?

Anonymous — Sun, 21 Aug 2016 18:03:19 GMT

Thanks for your response. I did try talking to them to ask for a payment delay (skip next month) but the loan is too new, they won't refinance because it's too new, and they also won't work with me to sell the vehicle (IE. personal loan for the difference) because Chase bank no longer does that.

When you say I may get sued, how likely is that? I don't mind not answering collection calls for a while, but is it an absolute certainty they will sue me? What happens if I simply choose to ignore everything I get from the moment the vehicle leaves my control?

Also, as you mentioned there really is no difference, should I voluntarily give it up or should I just let them snag it from me in the night?

Re: Is voluntary repossession viable in this case?

sarge12 — Sun, 21 Aug 2016 18:40:51 GMT

resettime12 wrote:

Basically where I'm at now is I consistently struggle to make the monthly payment of $750 and my insurance went up with the truck from the VW. (+$100/m).

What is the best course of action in this case? Thanks!

It is unfortunate that you allowed yourself to get that upside down on this loan, but if it were me, here is what I would try to do. I would explain the situation to the creditor and see if he could find an alternate buyer for the truck, and rollover any defecit into a two or three year unsecured loan The creditor almost always loses some money in a repo, so he might be motivated to do so. This may have you paying for several years on the vehicle you use to drive, but a repo + defecit judgement would also and would be much worse on your credit!

Re: Is voluntary repossession viable in this case?

Appleman — Sun, 21 Aug 2016 22:19:01 GMT

Resettime12, welcome to the forums but I wish it were under different circumstances....

A voluntary reposession is likely to really jack up your credit. I think there are quite a few people in your situation and there is talk of an auto bubble popping. I imagine you would agree that your loan probably should not have been made given your income. But that is in the past, time to move forward.

I agree that a full on bankruptcy may be the most expedient way out of this financial mess. I am not an attorney and have not been through bankruptcy myself (but have been close) so you are going to need real legal advice that you pay money for, it will be worth it IMO. My take is you are going to screw your credit either way (repossesion or bankruptcy) but the bankruptcy may put you in a position where you can emerge and get a true second chance. If you get the repossesion only, you will be dragging that boat anchor while trying to improve your finance all the while with a chance of being sued. Bring the lawyers in now rather than having them come after you for even more later.

Try checking out the re-building section of the forums. They will have real world advice to help you navigate the uncertain waters ahead.

I/we all wish you luck and please let us know how things go.

Re: Is voluntary repossession viable in this case?

Anonymous — Mon, 22 Aug 2016 00:05:28 GMT

Thank you to all 3three of you who responded. It seems like I need to talk to my attorney first, see what we can navigate through, and then go from there.

My mindset is that this is not anywhere close to an ideal situation, but I'm young and can learn from it. I know the consequences and what brought me to this point so I apprecaite the input. I'll post back with what happens!

Re: Is voluntary repossession viable in this case?

sccredit — Mon, 22 Aug 2016 17:09:55 GMT

@Anonymous wrote:
Thanks for your response. I did try talking to them to ask for a payment delay (skip next month) but the loan is too new, they won't refinance because it's too new, and they also won't work with me to sell the vehicle (IE. personal loan for the difference) because Chase bank no longer does that.

When you say I may get sued, how likely is that? I don't mind not answering collection calls for a while, but is it an absolute certainty they will sue me? What happens if I simply choose to ignore everything I get from the moment the vehicle leaves my control?

Also, as you mentioned there really is no difference, should I voluntarily give it up or should I just let them snag it from me in the night?

A $13k balance (will likely be much more) will definitely get you sued. I have no doubt at all they will pursue it. Sorry.

Re: Is voluntary repossession viable in this case?

StartingOver10 — Mon, 22 Aug 2016 21:08:11 GMT

@sccredit wrote:
@Anonymous wrote:
Thanks for your response. I did try talking to them to ask for a payment delay (skip next month) but the loan is too new, they won't refinance because it's too new, and they also won't work with me to sell the vehicle (IE. personal loan for the difference) because Chase bank no longer does that.

When you say I may get sued, how likely is that? I don't mind not answering collection calls for a while, but is it an absolute certainty they will sue me? What happens if I simply choose to ignore everything I get from the moment the vehicle leaves my control?

Also, as you mentioned there really is no difference, should I voluntarily give it up or should I just let them snag it from me in the night?
A $13k balance (will likely be much more) will definitely get you sued. I have no doubt at all they will pursue it. Sorry.

^^^Agree with sccredit here.

When the creditor picks up the vehicle in an involuntary repo, or you drop it off in a voluntary repo, the lender will send it to the auction and it will sell for much, much less than what you could get on the open market today. The subsequent suit and judgement will then be for the deficiency + the repo fees and attorney fees and any other fee they can tack onto your debt. The judgment can last 10 years or 20 years and be renewed if unpaid. Look up your state's statutes so you know which applies for your jurisdiction The judgment then accrues statutory interest the entire time until paid. It is unlikely that you won't be sued for the deficiency.

Try to come up with some other solution so you don't have this long term debt hanging over your head.

Rework your budget, get a second job, sell things around the house, get a roommate, work for uber, try go fund me. Do what you have to do to come up with the funds to pay as much of the shortfall as possible.Sell the vehicle and pay the difference. Right now the shortfall seems large, but can be handled if you concentrate. If it goes through the repo process the shortfall has the potential of getting much, much larger.

Re: Is voluntary repossession viable in this case?

sarge12 — Mon, 22 Aug 2016 22:08:55 GMT

@Anonymous wrote:
Thank you to all 3three of you who responded. It seems like I need to talk to my attorney first, see what we can navigate through, and then go from there.

My mindset is that this is not anywhere close to an ideal situation, but I'm young and can learn from it. I know the consequences and what brought me to this point so I apprecaite the input. I'll post back with what happens!

I do not know what your other bills are like, but a BK stops repo judgements cold. I do not know if you qualify though, and recommend against it if you can find any other way...if you did a ch.13 it works sort of like consolidation loan through BK court.

Re: Is voluntary repossession viable in this case?

Anonymous — Wed, 24 Aug 2016 17:44:09 GMT

So would it be best for me to apply for a loan to attempt to get money to pay the balance? Obviously I don't want to get sued and definitely cannot afford that.

As far as ch13, what sort of implications does that have on credit? Is it a another kind of terrible item to have on your credit?

Re: Is voluntary repossession viable in this case?

sccredit — Wed, 24 Aug 2016 17:46:09 GMT

If you are dead set on getting rid of the truck, then yes you need to find a loan to pay off the balance.

Re: Is voluntary repossession viable in this case?

Anonymous — Thu, 25 Aug 2016 21:16:33 GMT

If you ultimately determine that you are going to go with voluntary repossession, do not hesitate to ask for a deficiency waiver.

While your deficiency balance looming is quite large, it is not insurmountable - many lenders, especially larger ones like Chase who have more-expensive attorneys on retainer, will consider letting you out of (waiving) at least part of your potential deficiency since they will avoid paying the repo guy, the lawyers, and the court costs to file against you for it later. Plus they know they can auction the collateral immediately, and they know in advance that you'll hand it to them in good condition (many people begin to destroy/trash out their cars once they realize the repo man is looking for them, thereby lowering the values). You may still end up with some thousands in potential deficiency, but that is better than $13-15K. You can ask this over the phone, but I'd probably suggest planting yourself in an actual Chase branch in the lending office and asking to speak to a manager. And of course, get the entire agreement in writing before you turn over the keys.

If you are leaning toward the bankruptcy option, definitely immediately seek the advice of an attorney with verifiable experience to guide you. You haven't had the car long enough to be eligible for a cramdown on the loan under Chapter 13, so you'd have to surrender it and ask the judge to discharge the deficiency. Bankruptcy itself does have costs and attorney's fees - structured into your plan, in Chapter 13 - so you might want to weigh those against the potential cost if you can get a deficiency waiver for at least some of the underwater amount, to see which one puts you farthest ahead in the end.

Re: Is voluntary repossession viable in this case?

sarge12 — Fri, 26 Aug 2016 01:24:23 GMT

@Anonymous wrote:
So would it be best for me to apply for a loan to attempt to get money to pay the balance? Obviously I don't want to get sued and definitely cannot afford that.
As far as ch13, what sort of implications does that have on credit? Is it a another kind of terrible item to have on your credit?

Ch 13 is along with Ch 7, one of the two major forms of personal bankruptcy. Ch.13 is a major neg on your CR for 7 years but declines in effect over time. Bk is meant to be a fresh start. Many on this forum have filed Ch 7 or Ch 13 and successfuly rebuilt to have decent credit scores a few years after filing. I filed when I was younger and my scores today are over 800. While I greatly regret my irresponsible behavior that was the cause of me having to file, I have never regretted the filing itself. I was in so deep, I do not believe I could have ever gotten straightened out without filing!

Re: Is voluntary repossession viable in this case?

Appleman — Fri, 26 Aug 2016 13:26:25 GMT

I can imagine what a 'cramdown' is related to a loan but have never heard the term before. At what point in the loan would that option be available?

Learn something everyday.

Re: Is voluntary repossession viable in this case?

StartingOver10 — Fri, 26 Aug 2016 13:45:53 GMT

Cramdown time restrictions 910 days of ownership (about 2.5 years)

For more info on cramdowns: http://www.nolo.com/legal-encyclopedia/cramdowns-chapter-13-bankruptcy.html

Re: Is voluntary repossession viable in this case?

Anonymous — Fri, 26 Aug 2016 19:45:02 GMT

Cramdown is provided for under Chapter 13 for secured loans - except the primary residence mortgage (homestead).

It causes the principal balance on the loan to be reduced to match the current actual (market or appraised) value of the collateral.

The interest rates are of course governed by similar reduction rules under bankruptcy, so in the end it can greatly lower a monthly payment and even potentially extend the loan term, because the payments are made under the Chapter 13 plan.

For cars, as the prior poster noted, you have to own it for 30 months (910 days, 2.49 years) before you file your Ch13 petition.

For any other (non-homestead) property, it's a year pre-petition.

Being too new for cramdown, OP's option under Ch13 BK would be to surrender the vehicle, and the deifciency would be aligned with his other unsecured debts to be handled through his plan, with the remainder if any discharged at the end.

Re: Is voluntary repossession viable in this case?

Anonymous — Sat, 27 Aug 2016 15:01:30 GMT

@Anonymous wrote:
If you ultimately determine that you are going to go with voluntary repossession, do not hesitate to ask for a deficiency waiver.

While your deficiency balance looming is quite large, it is not insurmountable - many lenders, especially larger ones like Chase who have more-expensive attorneys on retainer, will consider letting you out of (waiving) at least part of your potential deficiency since they will avoid paying the repo guy, the lawyers, and the court costs to file against you for it later. Plus they know they can auction the collateral immediately, and they know in advance that you'll hand it to them in good condition (many people begin to destroy/trash out their cars once they realize the repo man is looking for them, thereby lowering the values). You may still end up with some thousands in potential deficiency, but that is better than $13-15K. You can ask this over the phone, but I'd probably suggest planting yourself in an actual Chase branch in the lending office and asking to speak to a manager. And of course, get the entire agreement in writing before you turn over the keys.

If you are leaning toward the bankruptcy option, definitely immediately seek the advice of an attorney with verifiable experience to guide you. You haven't had the car long enough to be eligible for a cramdown on the loan under Chapter 13, so you'd have to surrender it and ask the judge to discharge the deficiency. Bankruptcy itself does have costs and attorney's fees - structured into your plan, in Chapter 13 - so you might want to weigh those against the potential cost if you can get a deficiency waiver for at least some of the underwater amount, to see which one puts you farthest ahead in the end.

Wow, so speaking to someone at the branch might potentially mitigate some of the negative balance? Or stop addition balance from being tacked on? The truck is still in flawless condition. I haven't abused it in anyway. The nearest branch is 250 miles away so that's a little bit inconvenient but I'll do what I have to if need be.

Would it even be worth it to try to speak to someone over the phone and discuss this possibility? And if I do get them to agree to the deficiency waiver, does that mean that I in effect "pay off" the loan because they will auction the vehicle and I pay the remaining balance, so it's not as large of an impact on my credit score or is it still voluntary repossession at it's core?

Re: Is voluntary repossession viable in this case?

StartingOver10 — Sat, 27 Aug 2016 15:49:07 GMT

It is still a voluntary repo and any time the lender auctions off the vehicle you get substantially less than the value so the deficiency increases.

I would call Chase first. Most of their branches now have very few staff and even the branch managers are powerless to do anything. Not like it was even a few years ago where they had personnel in the branches to help consumers.

Re: Is voluntary repossession viable in this case?

Appleman — Sat, 27 Aug 2016 21:56:00 GMT

Thanks for the information everyone. Informative post. Hopefully the OP will find a reasonable outcome.