It’s not unusual for someone to find one of the reasons for their debt is having purchased beyond their means. In particular, we often see individuals who purchase more car or more home than they can afford. Could be their situation changed, or perhaps they over-purchased initially.
Filing bankruptcy is a way to deal with your debt problems – all of them and this can include taking care of a car loan or car lease that is just beyond your ability to afford.
If you have a vehicle loan or lease that you can no longer afford your car loan payments, you can return the vehicle to the loan holder before it is repossessed. Voluntary repossession must be done correctly and has financial implications if there is a deficiency.
How To Hand Back Your Vehicle
Essentially what you do is call them up, tell them that you can no longer service the loan or lease and ask them to come and pick up the car. The lender will arrange for a bailiff to pick up the vehicle.
A couple steps to consider if you do hand back your vehicle:
- It is important that the vehicle is where you tell them it will be.
- Remove all personal items and your license plates from the vehicle.
- Leave insurance on the vehicle until it is picked up as you are responsible for any damages to the vehicle while it is in your possession.
Once the vehicle is picked up it will be taken to auction and sold. Usually the amount the car is sold for, minus selling costs, is not enough to repay the remainder of the loan and there is a deficiency. The lender will then contact you with the amount still owing on the car and request payment. This leftover amount owing is also referred to as a shortfall and shortfall debts are unsecured debts and will be included in your bankruptcy or consumer proposal.
Deciding to return a car can be a very difficult decision. One of the values of discussing your options with a trustee is that it forces you to take a long hard look at your monthly finances. It becomes obvious very quickly if your car is a greater burden then you can afford when you begin to list all of your monthly costs but, you must be aware that if you remove your vehicle from your monthly budget you must have a transportation plan in place to replace it whether that be a different vehicle, taking the bus or sharing a car with a friend or family member.
Contact a trustee to talk about your options. Whether you choose to keep your car, or return it, we can help you run the numbers. If you haven’t returned your vehicle yet, talk to your trustee about the timing to ensure that you shortfall will be included in your bankruptcy or proposal.