Surrendered car now I owe $8,000 what are my options?

Whether it’s due to a job loss, high medical bills, divorce, or simply a financial overextension, it’s not unusual for some car owners to realize they can no longer afford a car they own. Recently on our legal forum a user asked, “If I voluntarily surrendered my vehicle to Capital One finance about 11 months ago and I now owe them $8,000 what should I do?”

Voluntarily surrendering your car

Voluntarily surrendering your vehicle is considered a less adversarial way to deal with a car if you cannot make your car payments. Although you did not meet the terms of the loan agreement, you have voluntarily surrendered your vehicle, eliminating the need for the finance company to come and forcibly repossess it.

Unfortunately, a voluntary surrender will still be listed on your credit report as a “voluntary surrender” and will still negatively impact your credit score. It will also remain on your credit report for up to seven years from the original date of delinquency.

What happens after a voluntary surrender?

So what happens now? You mentioned that Capitol One has not had any contact with you. Generally, after a voluntarily surrender, the finance company or creditor will put the car up for sale and notify you.

You should also receive a statement after the car is sold. In some cases the car may have been sold for less than the amount you owed on the original loan. This difference is referred to as a deficiency and may be listed on your credit report as debt owed to Capital One. Unfortunately, because you did not pay the debt as agreed, the deficiency does not simply disappear, even if you no longer own the car.

What will the creditor do about a deficiency?

If Capital One wants to, they have the legal right to sue you and pursue the deficiency. If they successfully win their suit against you, the court will issue a deficiency judgment, and you will be liable for the debt.

If you do not repay the debt or you are not able to come to some type of financial arrangement with the lender, they may have other legal ways to satisfy the judgment. For example, they may be able to request the following against you:

• Wage garnishment
• Bank account levy
• Repossession of certain assets

Now whether the creditor will go to all that trouble is anyone’s guess. Sometimes creditors don’t bother because they know you have very limited assets and/or income and legal action is time-consuming and expensive.

State laws may also specify what actions creditors can legal take against debtors. For example, in Texas, some unsecured creditors, such as credit card companies, do not have the legal right to request wage garnishments. Review your state laws for more information about the protections offered.

Is a voluntary surrender better than repossession?

Although you may not have fully realized the financial ramifications of a voluntary surrender, many proponents of this action argue it is still a better than involuntary property repossession. You have saved your lender the cost of repossession, and instead, you took responsibility.

Many suggest voluntary repossession allows you to maintain a positive relationship with your lender, and they may even be willing to do business with you in the future. You will, however, be considered a high risk consumer and can expect higher costs to borrow money, at least until you can work to repay the debt and increase your credit score.