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Voluntary Auto Repossession (Repo)

A voluntary repossession involves the borrower giving his or her car back to the lender, usually because the borrower is no longer able to make the required payments. Sometimes, with the cooperation of the lender, consumers return property as a way of reducing their debt ratios.

Does it get you off the hook?

Contact your creditor as soon as you realize you will be late with a payment.

Not usually. Giving a car back can be just as bad as an involuntary repossession. The effect on your credit may be the same and may be listed on your report for up to seven years. You may also still end up owing the lender money after turning your car in. You will, however, be saved the expense of the repossessor's fee, storage fees and the prepayment penalty if you have one on your loan. If you can find a buyer yourself, you may save a lot of money. You can probably sell your car for much more than it will bring at auction.

Keeping communications open with your lender

Contact your creditor as soon as you realize you will be late with a payment. Many creditors will work with you if they believe you will be able to pay soon. If you have lost income but expect to regain it, ask the lender to defer a payment to the end of the loan. If you reach an agreement to modify your original contract, be sure to get it in writing in order to avoid questions later. Again, if you can't do anything else, try to sell the car yourself.

After you turn it in

Once you've turned your car in, your creditor may decide to keep it as compensation for your debt or sell it in either a public or private sale. In some states, your lender must let you know what will happen to the car. For example, if they choose to sell the car at public auction, state law may require that they tell you the date of the sale so that you can attend. It's important to attend if possible, to make sure they try to sell your vehicle in a commercially reasonable manner to get the best price. If the vehicle is to be sold privately, you may have a right to know the date it will be sold. Depending on state law, failure to sell the car in a commercially reasonable manner may give you either a claim against your lender for damages or a defense against a deficiency judgment-a court order mandating you to pay the debt you owe.


A deficiency is any amount you still owe on your contract after your creditor sells the vehicle and applies the amount received to your unpaid balance. In most states, a creditor who has followed the proper procedures for the sale is allowed to sue you for a deficiency judgment to collect the remaining amount owed on your contract.

Depending on your state's law, if you are sued for a deficiency judgment, you should be notified of the date of the court hearing. This may be your only opportunity to present any legal defense if the lender failed to sell the car in a commercially reasonable manner. An attorney will be able to tell you whether you have grounds to contest a deficiency judgment.

Moving on from a repossession

There is hope. Thousands of consumers have learned firsthand how legitimate credit repair firms are a money saving solution to their credit history problems. By disputing items that are inaccurate, unverifiable or misleading, legitimate credit repair firms can work to remove repossessions from credit reports.

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