If I have an RV loan that I must default on, is it better to call the bank up front and tell them or let it get repossessed?

UPDATED: Jun 6, 2012

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If I have an RV loan that I must default on, is it better to call the bank up front and tell them or let it get repossessed?

I owe $17,500 more on the RV than the blue book value. I can’t get a loan for this amount and the bank won’t work with me. I can’t keep up the notes of $523 per month.

Asked on June 6, 2012 under Bankruptcy Law, Texas


B.H.F., Member, Texas State Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Look at your agreement and review it for any penalties associated with defaulting on the loan.  Some will include extra penalties for involuntary repossessions.  Small cars are fairly inexpensive for a bank to repossess-- just call a tow company.  RV's are larger and more expensive.  This means that they will eventually pass this cost on to you.  If penalties like this are included in your note, then you would be better off doing a voluntary surrender to avoid the extra repo fees.  You will still be liable on the debt until they resell the RV.  You should receive a credit for any amounts of the sale price.  For example (assuming that you owed only $17,500), if the RV sells for $10,000.00, you will only be liable for the balance of $7500.  But you will also be liable for any other fees-- so do what you can keep those costs as low as possible.  There may be some other provisions in the note which could be helpful, but you just need to read it carely to follow the process for invoking any other return, surrender, or default procedures.

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