Going through a divorce and behind on your car payment? Or bought something out of budget and you lost your job?
So you think, okay, I can’t pay and the right thing to do is to surrender the car back to the bank and move on. Maybe, but beware of deficiency judgments that can dog you for years after you give it back.
Don’t Just Give It Back And Walk Away!
The surrender of the car does not end your obligation to pay off the debt. After all, you signed a contract.
The contract says that you owe the all of the money that you agreed to pay for the vehicle. The minute you drive it off the lot, that vehicle lost some of its value. So, when you give it back after weeks or months of additional wear and tear and mileage, it may not be worth what you owe on it.
It’s Not Over Just Because Your Bank Took Back The Car
The contract, where you promised to pay, says this. The bank can sell your car in what they call a “commercially reasonable manner.”
Here’s what they will really do. They will sell it at a wholesale car auction because that is a commercially reasonable manner and it is easy and quick for them.
For you, though, it can be a disaster.
You Will Be Left Owing A Deficiency
At a wholesale auction your car won’t even go for it’s full retail value, and it sure won’t cover what you owe on it. So the dealer or bank takes what you owe, subtracts what they get from auction, then adds on their costs and expenses for having to arrange the sale and clean the car, plus late fees and interest and legal fees.
If you just give it back and walk away, you will probably still owe a lot of money. The amount you owe is called a deficiency.
What Are Deficiency Judgments?
After you surrender your car, the bank or dealer has five years in Arkansas to sue you for the deficiency amount. The longer they wait, the more interest you will owe.
When they sue to obtain a deficiency judgment, they add their legal fees and costs, too. Once they obtain a deficiency judgment, they can garnish your wages and your checking or savings account.
Lesson: Do not surrender your vehicle and walk away!
If you are unable to afford your car, your first attempt should be to sell it yourself on the open market and pay off your note. If you’re lucky you can get what you owe on it, pay the bank and walk away. You do not need a lawyer to do this.
A second option is to sell it on the open market for as much as possible, pay down the note and make arrangements to make payments on the balance. This is something to work out with your bank and you may need a lawyer’s help to do it. The cost for legal services in this situation is most certainly less expensive than the cost of just surrendering the vehicle and walking away.
If you do not want to sell the vehicle yourself, a third option would be to negotiate with the bank to surrender the vehicle, agree on the price credit and make payment arrangements at that time on your deficiency amount.
You will likely still owe the bank, but any of these options is much better than ignoring your debt and allowing it to accrue interest for several years before the lender gets around to filing suit against you.
Leigh Law Can Help
Give us a call at Leigh Law to help you figure out your options and what the likely realistic result is under your given set of circumstances! We’d love to Roar to your Rescue!
Call For A Free Case Evaluation
Case evaluations are completely free; our fees are flat and affordable. Call Leigh Law today at (501) 227-ROAR or Email Us to set up a free consultation.