If you surrender a car to the bank that you can’t pay for, what happens then?

Asked on May 22, 2012 under Bankruptcy Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

It depends on what the lender or financing company wants to do. You are obligated to repay the principal balance borrowed to purchase its car in its entirety. The lender has the right to repossess the car as one way to seek payment, but it is not limited to taking the car; if the car is worth less than the outstanding balance on the loan, the lender or financing company may sue you for any amounts owed in excess of the car's value.Thus, it is up to them whether to take further action or not.

However, if they agreed to accept the car back as payment in full of the debt, then they cannot sue you--their own agreement would preclude or prevent them from doing so, and if they do try to sue you, you could raise that agreement as a defense ("accord and satisfaction") to their claim.

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