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Is turning in a car to the bank voluntarily better than a repossession?

No, not at all. It is a common misconception among people facing hard times that voluntarily turning in a car is not a repossession. That is not true. Just because the tow truck isn't in your driveway hooking up your SUV does not mean that your car is not being repossessed; it is!

What is the Advantage of Turning It In?

The fact of the matter is, you have defaulted on the loan. The bank will sell the vehicle, most likely for more than you would have obtained if you had sold it yourself, and then come after you for the difference (called a "repo deficiency.").

The only real advantage of doing it voluntarily is to have some control over the process. You can clear out all of your possessions and arrange for alternative transportation. That is much better than waking up in the morning with no car in the driveway, no way to get to work, and with your laptop bag in the trunk because you forgot to bring it in to the house last night.

Are There Any Other Options?

If you cannot afford the car anymore, then you have two other options. The first is to sell it yourself (assuming it is worth more than you owe, or the bank is willing to cooperate with you on a sale for less than what is owed). This continues to allow you a measure of control and potentially reduces (or eliminates) any lingering repo deficiency.

The second is to file bankruptcy, which would discharge any repo deficiency, get you out of the car payment, and again, give you a measure of control over the process of turning in the car.

So Which Do I Choose?

Which option depends to a great extent on your overall financial situation.  If the car payment is the only financial problem you have, and your credit rating is good (north of 700), then selling the car may well solve the problem and minimize any damage to your credit.

But if your car payment is not your only problem, and credit cards and other debts are piling up, then bankruptcy may well be the better choice.  Need help deciding? Then download my free book, Am I In Too Deep? A Guide to Knowing When You Need to File Bankruptcy in New Jersey to find out if bankruptcy might be the right solution.

If you are a South Jersey resident and have a car loan that you can no longer afford and are thinking about bankruptcy, please feel free to call my office at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your options.

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