If you are behind on car payments or decide you will not be able to make the payments in the future, you can decide to voluntarily turn in your vehicle. We encourage our clients not to voluntary turn in their vehicle prior to filing bankruptcy, but we will discuss that in more detail below.

What if you do choose to voluntarily surrender your vehicle? How should you go about doing that? If you are going to voluntarily turn in your car you will need to call the finance company and set up a time where you can bring the vehicle to them. It is critical you get a business card or use some kind of identifying method to show who you left the vehicle with. You do not want to just drop it off and walk away without knowing exactly whom you turned the vehicle in to. In the past we have heard of dealerships not reporting the vehicle as turned in to the finance company. This means you would still owe on the car. Sometimes people will choose to voluntarily turn in the vehicle instead of having the finance company come to their home or place of work and repossess it. By doing so they can avoid the feeling of not knowing when their car will be picked up. It is on their terms instead of the lenders.

Once you turn the vehicle in to them, the creditor will then sell the vehicle. You will receive a statement from the finance company after the vehicle is sold. You will still be responsible for the difference between the amount you still owe for the vehicle and what the sales price is. That debt does not automatically go away just because you do not have the vehicle anymore. The amount you owe is called the deficiency balance and this is a debt that can be included in a bankruptcy filing. This occurs whether the vehicle is voluntarily surrendered or repossessed.

However, it is important to know voluntarily turning in a vehicle prior to bankruptcy filing will still go on your credit report as a repossession. This means you will still have a negative mark on your credit report and do not forget you will still owe the deficiency balance even if you voluntarily surrender the vehicle and do not file bankruptcy. We typically encourage our clients to surrender their vehicle within the bankruptcy instead of the voluntary surrender prior to bankruptcy. If you surrender the vehicle within your bankruptcy a repossession does not appear on your credit, and you can still eliminate the remaining debt within your bankruptcy. If you are planning to file bankruptcy and have already voluntarily surrendered your vehicle, be sure you discuss the voluntary surrender with your attorney so the deficiency balance can be properly taken care of.