Ways to Prevent Voluntary Repossession
- Most creditors realize that a repossession, even voluntary, will cost them more than a late payment. If your creditor is willing to work with you, ask for an extended grace period while you work out a way to make your payments. You should always contact your creditor the moment your payments are late. If the creditor makes any modifications to your car loan contract, such as an extended grace period or changed due date, make sure to get it in writing.
- One way to avoid a repossession is to sell the vehicle for an amount greater than your loan. If this is not possible, ask a friend or family member to take over the payments. In either case, you will be absolved of the debt without hurting your credit score.
- If your vehicle is in danger of repossession, voluntarily or otherwise, discuss your financial situation with a credit counselor, who may be able to work out an arrangement with your creditor. Visit the National Foundation for Credit Counseling (see Resources) for more information on credit counselors in your area.
- Filing bankruptcy will hurt your credit score more than a voluntarily repossession, but it does have its merits in some situations. Bankruptcy allows you to keep your car regardless of how much you owe, even if a repossession is already in action. A bankruptcy filing may your best option if you have other consumer debt, as it will lower your payments or absolve your debt while you get back on your financial feet.
- A voluntary repossession may make more sense in some states than in others. For example, in Utah a voluntary repossessor is awarded a waived deficiency if the total is more than $3,000, while Massachusetts drivers do not need to pay a deficiency on any repossession unless it exceeds $2,000. Before avoiding a voluntary repossession, consult your state's repossession laws to determine if a repo is in your best interest financially.
