If I abandon my car and let the debt company know where it is, will that free me up from the car loan debt?

UPDATED: Sep 19, 2011

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If I abandon my car and let the debt company know where it is, will that free me up from the car loan debt?

I have had this car for a year but stopped making payments about 6 months ago. Will returning the car to them benefit me? Or would it make things worse? I don’t want the car (I got it for a job I lost) but I can’t pay the debt right now.

Asked on September 19, 2011 under Bankruptcy Law, Washington


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

A car lender has the right to take  the car to help pay off the loan, if the car owner defaults on the debt; but the car lender is not required to take the car as payment in full, if the value of the car does not cover the debt. Instead, in that case, the lender can sue for the balance. Examples:

* Say you owe $7k more on a car loan when you default, but he car is worth $8k; since the car's value more than covers the debt, you can probably get the lender to take the car in satisfaction of  the loan (they may even owe you some money back in some circumstances).

* Say you owe a total of $16k more on a car and it's worth $11k at present--then even if the lender takes and sells the car, you'll still owe $5k, and they could sue you for that.

So under the loan, you owe certain amount of money. The lender is entitled to payment in full, whether it comes from your payments, from repossessing the car, or both. You can't force the lender to take the car as payment in full when you owe  more than the car is worth, though you can negotiate with them and see if they'll agree to do this, as a way to avoid the cost of a lawsuit and collections.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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