Our New Jersey Bankruptcy Lawyer Explains Car Repossession Options

It's a widespread but incorrect belief that voluntarily surrendering your vehicle to the lender is not considered a repossession. Many individuals facing financial challenges fall prey to this myth. However, this is far from reality. The absence of a tow truck in your driveway, attaching itself to your SUV, doesn't negate the fact that a repossession is taking place. In fact, voluntarily returning your car to the lender is still legally classified as repossession. Understanding this distinction is crucial as it has significant implications for your financial situation and credit score. Our New Jersey bankruptcy lawyer is here to guide you through these challenges and help you explore your options in such scenarios.

The Advantages of a Voluntary Repossession

If 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 repossession process. You can clear out all of your possessions and arrange for alternative transportation. That is much better than waking up in the morning after your car is repossessed, leaving you with no vehicle in the driveway, no way to get to work, and your laptop bag in the trunk because you forgot to bring it into the house last night. 

Other Options If You Cannot Make Your Car Payment

If you cannot afford the car anymore, then you have two other options:

  1. The first is to sell it yourself, assuming it is worth more than you owe or that 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.
  2. The second is to file bankruptcy in New Jersey, 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.

Determining What Option to Choose

Which option you choose depends greatly on your overall financial situation. If the car payment is your only financial problem, and your credit rating is good (north of 700), then selling the car may 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, bankruptcy may 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 determines if bankruptcy might be the right solution.

If you live in Burlington, Camden, Gloucester, Salem, or Cumberland County, 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.

Not sure if bankruptcy is right for you? Take the quiz to the right to find out more!

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.