As this week we have reviewed the options for individuals to keep their vehicles in bankruptcy, there is another option for those individuals who overextended themselves with a car loan: surrender the vehicle. Surrender will allow you to walk away from the car and owe nothing.
Our blog has mentioned a debtor files a “statement of intention” with the court regarding what they wish to do with their secured debts. Debtors can file this and state they intend to surrender the car. If you lease a car and not own it, you can get out of the lease by surrendering the car and rejecting the lease on the statement of intention.
The main benefit of surrendering a vehicle is that debtors can get rid of the car and the debt if they owe more money than the car is worth, or if the monthly payments are simply too high for the debtor to maintain. Without bankruptcy, you cannot just give a car back to a dealer and have them wipe clean the remaining debt. Outside of bankruptcy, even if the lender repossessed the car, the lender would continue to pursue actions against you for the remaining portion of the debt.
Bankruptcy offers the borrower relief that he or she would otherwise not have for the amount owed on the car if it is surrendered in bankruptcy. The main problem with surrendering a vehicle is most people use their cars to go to work and drive their kids to school, but these problems can be managed. Many debtors re-discover public transportation, borrow a car from a friend or relative, or purchase a different, down-sized car. If you need a loan for a used car, there are lenders willing to offer loans to people post-bankruptcy. They are likely sub-prime lenders, so debtors must be sure the company is reputable before proceeding with a new car loan. Although figuring out a new mode of transportation could be a hassle, the benefits will likely outweigh any inconvenience for debtors who overextended themselves on a car loan.
U.S. Law Attorneys, Ltd. – Schaumburg bankruptcy lawyers