If I have to give up my car because I can’t afford it and I also signed a document regarding collateralfor the loan, do I have to give up the collateral also?

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If I have to give up my car because I can’t afford it and I also signed a document regarding collateralfor the loan, do I have to give up the collateral also?

Asked on February 5, 2012 under Bankruptcy Law, South Carolina

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

From what you write, it appears you provided additional colleral, above and beyond the car itself. If that is the case, then the answer to your question depends on the remaining value of the loan vs. the value of the car. When the car is repossessed, it will be sold; the proceeds of the sale, less certain administrative expenses and expenses of collection, will be applied against what you owe on the loan. If the proceeds of the sale pay off the remaining balance of the loan, the lender will not have recourse to the colleral--it's debt was satisfied. But if there is still a remaining balance after the car is sold, the lender can look to your colleral to pay off the balance.


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