If my car gets repossessed, does that end my obligation?

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If my car gets repossessed, does that end my obligation?

I bought a car from DriveTime

recently have had some hard

economical times and just

cannot afford the payment of

the car anymore are there for

one to give them a voluntary

repossession or would it be

better just to have them come

get it and do their own

repossession the car is in

excellent condition if not

better condition than when I

bought the car I have no plans

of destroying the car before

they get it back I just want to

be a gentleman about it and end

the loan contract am able to

do that at the present time I

believe is repossession

Asked on April 6, 2016 under Bankruptcy Law, Tennessee

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

It does not legally end your obligation, no. You are obligated for the full principal balance of the loan. When a car is repossessed, then auctioned/sold off, the proceeds of the sale (less certain costs of repossession and sale) is applied against that balance, but if it does not fully pay off the balance, you will still owe what's left. Example: say you still owed $16,000; the current blue book or fair market value is only $13,000, due to depreciation (i.e. the value of a car of that year, make, model, options, condition, and mileage); say that the costs of repossession and sale are $1,000...in this example roughly $12,000 would be applied against the balance of the loan, leaving you owing another $4,000, which the lender/dealership/etc. (whoever provided the financing) could sue you for.
Now, a lender may voluntarily agree to take the car back in full satisfaction of the loan; or even if they don't formally agree, may decide it's not worth their while to sue you for whatever is left over/unpaid--but that's their choice. Legally, they could proceed against you for any amount not paid off or satisfied by the reposseesion.


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