Highlights (Click for More!)
If you are searching for information on voluntary repossession, then you absolutely NEED to continue reading. Voluntary repossession involves a creditor (that holds a title to a piece of your property) taking back the property from you. The term is used more often than not to refer to an automobile repossession though it can sometimes refer to voluntary house repossession. The reason behind repossession generally involves overwhelming lack of payment on debt.
In voluntary repossession the debtor will voluntarily (of their own accord) give up a piece of property that is securing a loan. As mentioned above, automobile repossessions are most common, and when repossessed, go to the lender that financed the purchase originally. They most often occur when someone falls behind on their loan payments, is swamped with debt, or just plain old decides to surrender the property rather than have the creditor attempt to repossess the property involuntarily.
Though it is not nearly as common as automobile repossession, voluntary repossession can take place with any type of secured loan. Work equipment, jewelry, and other reasonably expensive items that require loans are all apt to be repossessed in the case of non-payment.
How Does Voluntary Repossession Work?
If you are forced to voluntarily surrender a piece of property to the lender that originally financed its purchase, the first thing that you should do is contact them. It is of utmost importance to explain your financial circumstances. Highlight that you can no longer afford the monthly payments, won’t likely be able to in the near future, and that you would like to surrender the property.
Though the situation of voluntary repossession is far from ideal for a creditor, they will most likely be okay with it as a worst case scenario. After you contact them, they should give you a location as to where you can turn over the property. They should then tell you (and if they don’t, ask) all of the details that you would need to know about the procedure.
If you attempt to voluntarily turn over a piece of property to a creditor, you should first expect them to resist your request. Most of the time, they would much prefer working with you to find a way for you to keep the loan and retain the property. The bright side of this is that simply talking things through with them might help you find a way to safely maintain the loan.
Voluntary Repossession vs. Standard Repossession
Though they both have the same (negative) effects on your credit score, voluntary repossessions and standard repossessions differ slightly. As you can probably guess from their names alone, a voluntary repossession is, well, voluntary while a standard repossession doesn’t have anything to do with volunteering.
If you have been struggling to repay a loan for some time and are falling far behind, then there is a good chance that your property will be repossessed, especially in the case of a vehicle. When it comes down to this point, many people choose to voluntarily repossess their vehicle rather than fight it out because the cost of the process is generally much less than with a standard repossession.
What About a Deficiency Balance?
A deficiency balance is another factor that you have to consider when you voluntarily repossess a vehicle. After the car is sold at an auction, the lender has the legal right to ask for the balance (the deficiency balance) if any is remaining after the vehicle’s sale.
A creditor can even file a lawsuit against you if you do not pay this deficiency balance. This is why you should only follow through with a voluntary repossession as a last resort – if you actually can’t afford the loan. In almost every case, you will be left owing the lender some money even after you part with your property.
Remember to only consider voluntary repossessing an object as a last resort, if you truly cannot pay off the loans attached to it. Though it is a far from ideal solution to most financial problems, sometimes it is the only solution that there is. If this is the case with you, refer to the information above to make the best possible decision when repossessing your vehicle.
And, like always, know your rights and do your research. The more that you know going into a voluntary repossession, the better it can turn out for you.