The term voluntary car repossession refers to the act of surrendering a car voluntarily when payments are in arrears. There are circumstances when such an extreme measure can be more desirable then the alternatives. A person who defaults on payments sometimes by a month or two may well begin receiving phone calls and letters indicating that if the arrears are not paid the car may be repossessed.
Usually the lender will call the individual who is behind on their payments and sometimes a grace period may be granted so the individual can catch up. However if the grace period ends and the individual is still in default on their loan the account may end up in the hands of a credit collection agency. Although a credit collection agency is not authorized to repossess a car without appropriate paperwork and notification by the lender they may at times intimate that this will be the consequences of nonpayment.
Before the debt situation becomes problematic a person should take stock of their financial situation and see if there is any possible means to repay the loan. Bringing along current can help mitigate the damage that defaulting on payments has done a credit rating. At times it may be necessary to sacrifice some luxuries in order to do this and in other situations it is not possible.
However there are times when a person knows that they will be unable to make the payments. If they feel that there is no way to repay the loan amount they may consider one of several options including bankruptcy, debt counseling, or voluntary repossession. Although voluntary repossession is a drastic measure it can avoid a possible judgment on their credit report, which can be more damaging than a voluntary repossession.
In a case where debt counseling appears to be a good option for the person the counselor can notify the lender with the individual is in debt counseling. The lender is then obligated to stop any legal proceedings while payment arrangements are worked out. There might be instances where surrendering the car voluntarily could be the only viable alternative even with appropriate counseling.
If a car is surrendered voluntarily, the loan still may not be fully discharged. The car will then be sold at auction or privately and any difference between the sale price and the amount still owed will be the responsibility of the borrower to repay. Before choosing any course of action, it may be wise to seek financial or legal advice from a qualified professional.
