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Voluntary repossession

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Anonymous
Not applicable

Voluntary repossession

I have a 2012 Chevy Cruze with 89,000+ miles that is at least $7000 upside down. As of right now, it will be paid off in 2020. I've been approved for a new car loan with a car that has 12000 miles. With the Cruze, I feel like I am paying for a car that will have no value when the loan is up. I know that repossessions are a major hit to your credit, but I won't have to buy a new car for several years. Is it a bad idea to give the car back to the finance company?
Message 1 of 16
15 REPLIES 15
TRC_WA
Senior Contributor

Re: Voluntary repossession

So when the finance company sells the vehicle at auction and comes after you for the remaining $7000+... what are you going to do?

FICO8 current as of : ----- EQ: --- TU: --- EX: ---
Hard INQs last 12 months: EQ: 5 | TU: 7 | EX: 9
Verizon Visa $6500 Amex Delta Platinum $10,000 Care Credit $12,000
NFCU CashRewards $6000 Apple Card $2000 Best Buy $3500 Amazon $5000
NFCU auto loan (2022 Ford Bronco Sport Badlands - Cactus Gray) $44k new - balance $31k/6.94%
Total CL: $45,000 --- Total CC UTI: --% --- AAoA: 5.5 years --- Income: $200k
Last app: 11-30-23
Message 2 of 16
sccredit
Valued Contributor

Re: Voluntary repossession


@TRC_WA wrote:

So when the finance company sells the vehicle at auction and comes after you for the remaining $7000+... what are you going to do?


$7k?  They're going to auction that thing and that $7k will become $10k-$12k.  

 

OP - what if 5 months down the road the car gets stolen and totaled?  Then you have to buy a new car but will only be able to do so at a high interest rate because you have a repo, if you can get one at all.

 

 

Message 3 of 16
Anonymous
Not applicable

Re: Voluntary repossession

From the research that I've done and briefly speaking with a lawyer, and if the finance company is willing, the company can file a 1099 (I believe that is the correct form) with the IRS so that it is turned into my income that I have to claim. I know that I most likely have to retain a lawyer for this.
Message 4 of 16
TRC_WA
Senior Contributor

Re: Voluntary repossession


@sccredit wrote:

@TRC_WA wrote:

So when the finance company sells the vehicle at auction and comes after you for the remaining $7000+... what are you going to do?


$7k?  They're going to auction that thing and that $7k will become $10k-$12k.  


 

 


That's why there's a + sign in my original post...   to represent an unknown amount higher than $7000.

FICO8 current as of : ----- EQ: --- TU: --- EX: ---
Hard INQs last 12 months: EQ: 5 | TU: 7 | EX: 9
Verizon Visa $6500 Amex Delta Platinum $10,000 Care Credit $12,000
NFCU CashRewards $6000 Apple Card $2000 Best Buy $3500 Amazon $5000
NFCU auto loan (2022 Ford Bronco Sport Badlands - Cactus Gray) $44k new - balance $31k/6.94%
Total CL: $45,000 --- Total CC UTI: --% --- AAoA: 5.5 years --- Income: $200k
Last app: 11-30-23
Message 5 of 16
Anonymous
Not applicable

Re: Voluntary repossession


@Anonymous wrote:
From the research that I've done and briefly speaking with a lawyer, and if the finance company is willing, the company can file a 1099 (I believe that is the correct form) with the IRS so that it is turned into my income that I have to claim. I know that I most likely have to retain a lawyer for this.

Not a chance of that happening.  They will, as stated already, sell your car at auto auction and come after you for the difference.  In terms of credit, there is no difference between a voluntary or involuntary repossession. It won't damage your credit for a 'few' years as it will stay on your reports for 7 years. Your best bet is too keep the Cruze until you have paid it down substantially.

Message 6 of 16
undrtkr65
Frequent Contributor

Re: Voluntary repossession

I would advise not to do that. I made the mistake of letting a car go back and I now have the car I want but at a 20% interest rate. I was a over the road truck driver at that time and the car was just seating there no one driving it. I wish now I wouldn't have done that.
Message 7 of 16
Anonymous
Not applicable

Re: Voluntary repossession

I have to agree with the prior posters - the short answer to "should I do this?" is NO.

 

The lender in question doesn't want your car.  They have no expectation of getting anything remotely close to your total from auctioning a 4-year-old Cruze with extremely high mileage.  They know going in that they'll have to chase you down for a large deficiency, probably at least $10-15k by the time they get the judgment in hand.

 

And make no mistake, they will pursue the judgment.

The lawyer-assisted situation you have looked at typically involves a borrower who is trying to avoid bankruptcy and is negotiating along those lines for a sort of cash-for-keys situation, where the lender writes off the balance in exchange for not having to chase the car down through the repo process and/or deal with filing proofs of claim and lifts of stay in bankruptcy court.  Usually, that means the amount they agree to write off is similar/close to the cost they will incur from the attorneys and the repo guy to go the usual route.  In your case, with such an underwater situation, they are not going to spend anything close to $10k coming after the car the usual way.  A couple grand, maybe.  And they know they can tack most of those expenses on to the deficiency balance in the end, anyway.   

 

I know it is hard to pay a note on a car you don't want anymore, and don't expect to be able to get out of in the end without losing a ton in the process.  But really, the thought of losing several thousand in potential future trade value, versus having a reposession and a potential judgment on your file for years to come, should be an easy choice.

Message 8 of 16
StartingOver10
Moderator Emerita

Re: Voluntary repossession

Everyone telling you not to do it above is right ^^^. 

 

Getting a judgment against you for a repo is easy money for the lender. These deficiency judgments accrue interest the entire time they are unpaid. Not only that, but the judgment is more than just the amount remaining - it is all the fees built up on top of the remaining balance of the loan. Attorney fees, default interest and any other fee they can devise.  The judgment lasts for 10 years to 20 years depending upon your jurisdiction. Check you state's statutes.  If the judgment remains unpaid, it can be renewed by the creditor that owns it at the time it ends.  

 

It is much easier to take care of the issue now rather than have it follow you on and off your credit report (in the public records).  Sell your vehicle. If you are upside down, do what you have to do to get extra funds to pay off the balance. It is much better than dealing with a judgment. 

 

FYI Judgments are bought and sold everyday - they don't just dissappear if the judgment holder goes out of business. 

Message 9 of 16
Pharoe33
Regular Contributor

Re: Voluntary repossession

Why not trade for a newer vechcle that has a rebate or other nice incentives. Often times some deals out there can eat up a great deal of the negative equity.

Message 10 of 16
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