If my car gets repossessed, does that end my obligation?
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If my car gets repossessed, does that end my obligation?
I bought a car from DriveTime
recently have had some hard
economical times and just
cannot afford the payment of
the car anymore are there for
one to give them a voluntary
repossession or would it be
better just to have them come
get it and do their own
repossession the car is in
excellent condition if not
better condition than when I
bought the car I have no plans
of destroying the car before
they get it back I just want to
be a gentleman about it and end
the loan contract am able to
do that at the present time I
believe is repossession
Asked on April 6, 2016 under Bankruptcy Law, Tennessee
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
It does not legally end your obligation, no. You are obligated for the full principal balance of the loan. When a car is repossessed, then auctioned/sold off, the proceeds of the sale (less certain costs of repossession and sale) is applied against that balance, but if it does not fully pay off the balance, you will still owe what's left. Example: say you still owed $16,000; the current blue book or fair market value is only $13,000, due to depreciation (i.e. the value of a car of that year, make, model, options, condition, and mileage); say that the costs of repossession and sale are $1,000...in this example roughly $12,000 would be applied against the balance of the loan, leaving you owing another $4,000, which the lender/dealership/etc. (whoever provided the financing) could sue you for.
Now, a lender may voluntarily agree to take the car back in full satisfaction of the loan; or even if they don't formally agree, may decide it's not worth their while to sue you for whatever is left over/unpaid--but that's their choice. Legally, they could proceed against you for any amount not paid off or satisfied by the reposseesion.
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