If you are one of the hundreds of thousands of Americans that have had to declare bankruptcy you might be wondering what will happen to your vehicle. In a chapter 7 bankruptcy you have three options: reaffirming your auto loan, and surrendering the car. And in this article we will discuss how voluntary surrendering your vehicle in bankruptcy is different than surrendering your auto back to the lender out of bankruptcy.
What is the Difference in Surrendering Your Car In or Out of Bankruptcy?
Surrendering your vehicle back to the bank and not being in bankruptcy means you are responsible for the deficiency; which is the difference of the price the car was sold at auction for and your balance on the loan. For example, if you owe $10,000 on your loan and you surrender it to the lender they will turn around and sell it at a public auction. Say they sell the car for $6,000 this means you now owe the bank the $4,000 difference.
Although it is “voluntary” and it sounds better than your car being repossessed the credit bureaus look at them both in the same way. Surrendering your vehicle still goes on your credit report as a repossession and will hurt your credit score.
If you are currently going through bankruptcy and have decided to include your vehicle in with your unsecured debts then you are essentially wiping away your debt to the lender. You will not be responsible for the deficiency of the balance after the car is sold at auction. This will also not go on your credit report as a repossession, making it that much easier to get an auto loan after being discharged from chapter 7.
Get a Car Loan after Bankruptcy
Here at BankruptcyAutoFinancing.com we can help you get the best auto loans after bankruptcy. We have a network of nationwide subprime lenders that deal specifically with bad credit, repossessions, and bankruptcy. There is a big market for financing a car after bankruptcy and our lenders will compete for your company. Start today by filling out our online application to see if you are pre-approved.
Remember we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.