Repossession Deficiency an Unpleasant Surprise if You Walk Away from Your Vehicle Loan

Last week the Tampa Tribune published a timely article about a growing problem in the Tampa/St. Pete area – lawsuits against consumers for repossession deficiencies.

In difficult economic times, cash strapped families sometimes come to the realization that they simply cannot afford a car or truck payment.   As difficult as it may be to get to work or to shuttle the kids around town with one car, getting rid of that second car or truck payment may seem like a good idea, especially if that second vehicle is a gas guzzling SUV or truck.

Unfortunately, in most cases, you may need to think twice about surrendering your car or truck back to the bank or finance company.  As the Tribune points out. surrendered vehicles are disposed of at an auto auction, where they often bring no more than half of "retail" value.  If your loan was a four or five year note, or if the interest rate was high, or if you paid little or nothing down, there is a good chance that you will be "upside down" with your loan.

Lenders will apply the auction sale price to the outstanding balance, then sue you for the balance under the contract.  As the Tribune article correctly points out, surrendering your vehicle does not cancel your contractual obligation or the accrual of interest.  Imagine the shock of discovering that you still owe $10,000 for a vehicle that you surrendered two months ago, and now you are facing a lawsuit and the threat of a judgment that can result in a wage garnishment.

Deficiency judgments are often the last straw for individuals trying to deal with debt, and we often see deficiency judgments in our office.  Bankruptcy is one tool to eliminate or greatly reduce your deficiency obligation.  Since bankruptcy empowers you to cancel contracts, it may be a financial tool to consider if you are struggling to pay a car or truck note that you cannot afford.