The Impact of a Voluntary Repossession in Florida

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As a law firm focused on helping people with defaulted debt, we often get asked about voluntary repossession. So let’s discuss how this happens and what the impact is.

Car repossessions in Florida involve specific legal processes, including the rights of borrowers and the responsibilities of recovery agents. Understanding these laws is crucial for protecting oneself from potential repossession.

Why Would Someone Consider a Voluntary Repossession?

Voluntary repossession, also known as voluntary surrender, is an option for individuals who are struggling to make their car loan payments and are facing the possibility of repossession. Someone may consider voluntary repossession if they are unable to catch up on their payments, are experiencing financial hardship, or want to avoid the stress and expense of a traditional repossession. By voluntarily surrendering their vehicle, individuals can avoid the negative impact on their credit report and potentially reduce the amount they owe on their loan.

Why Would Someone Consider a Voluntary Car Repossession?

If you are reading this, I probably don’t have to tell you that most people purchase a car with a loan. According to Statista, over 80% of new cars and over 35 of used cars are purchased with a loan. But unquestionably in modern times, when we have seen so many changes in society over the last few years, we know that life does not stand still. So while a vehicle may have been in your budget when you bought it, things may change in your life, and there may be a time later when it is no longer affordable. What is the best way of going forward and mitigating the impact of whatever changes you have to make?

Usually, there’s two different paths you can take. You can wait until the lender comes to collect it on their own, sends the repo guy in the evening, and it’s missing from your driveway in the morning. Or, if you are struggling to keep up with your car payment, you can voluntarily deliver the vehicle to the lender (normally by dropping off at a local bank branch or with a dealership), commonly called a “voluntary repossession.”

Understanding Voluntary Repossession

Voluntary car repossession is an option for individuals who are struggling to make their car loan payments and are facing the possibility of repossession. It involves surrendering the vehicle to the lender without the need for a court order. This can be a way to avoid the stress and expense of a traditional repossession, but it’s essential to understand the consequences of voluntary repossession before making a decision.

When you opt for voluntary repossession, you essentially hand over the keys to your car lender and walk away from the vehicle. This might seem like a straightforward solution, especially if you’re overwhelmed by missed payments and the looming threat of a repossession agent showing up at your door. However, while it might save you from the immediate stress of a forced repossession, it’s crucial to be aware of the long-term implications.

Managing Car Loan Payments

Managing car loan payments can be challenging, especially during times of financial hardship. To avoid falling behind on payments, it’s essential to communicate with your lender and explore options for temporary relief. This may include requesting a payment deferment, modifying your loan agreement, or making a lump-sum payment to bring your account up to date. Additionally, creating a budget and prioritizing your expenses can help you stay on top of your car loan payments and avoid the risk of repossession.

Consequences of Voluntary Repossession

While voluntary repossession may seem like a convenient solution, it’s crucial to consider the potential consequences. Voluntary repossession does not eliminate the debt, and the borrower is still responsible for any outstanding balance. Additionally, the lender may still report the repossession on the credit report, which can negatively impact credit scores. Furthermore, the borrower may be liable for any deficiency balance if the vehicle is sold for less than the outstanding loan balance.

The lender can choose to sell the repossessed vehicle either at a public auction or through a private sale, and it is important to notify the borrower about the method of sale. When the lender sells the repossessed vehicle, it’s often at an auction where cars typically fetch lower prices than their fair market value. If the sale price doesn’t cover the remaining loan balance, you’ll be on the hook for the difference, known as the deficiency balance. This can add a significant financial burden, especially if you’re already struggling. Moreover, the mark of a repossession on your credit report can make it harder to secure loans or favorable interest rates in the future.

Calculating the Deficiency Balance

When the lender calculates a deficiency balance, they total up all fees and charges that are owed. This commonly includes the principle balance, interest (which may be charged at a higher ‘default’ rate), late charges, charges incurred in collecting the vehicle (the repo guy’s fees), storage charges, and the auctioneers charges. And then once the vehicle is auctioned, the auctioned price is deducted from the total of the balances. Because all of the added fees and the relatively low amount that vehicles sell for at auction, it is fairly common that the deficiency is close to the amount that was owed before the vehicle was even sold!

While a voluntary repossession may mildly mitigation the lender’s collection costs, and thereby slightly reduce the deficiency, it doesn’t have a huge impact on how a deficiency is calculated.

Collecting on the Deficiency

After the deficiency balance is determined, the lender may send out collection letter or make collection calls. If the balance is not resolved, the lender has the option to seek to sue on the balance. Under Florida law, a lender has up to five years to try to sue on a debt on a written contract.

Understanding Florida repossession laws is essential for borrowers facing vehicle repossession. Timely action and legal guidance can potentially prevent losing a vehicle, and there are various protective options available under these laws for affected individuals.

If the balance goes to court and it is not resolved, it may result in a judgment, at which time the lender may attempt for forcibly collect through garnishment or other collection avenues.

If you want assistance in evaluating these options, I encourage you to give my office a call for a complimentary consultation with one of our experienced attorneys. We’ll evaluate the vehicle deficiency and any other balances you may have and see what options may be available to you.

Alternatives to Voluntary Repossession

While voluntary repossession may seem like a viable option, there are alternative solutions to consider. One option is to work with your lender to modify your loan agreement, which may include extending the loan term, reducing the monthly payment amount, or temporarily suspending payments. Another option is to seek the assistance of a bankruptcy attorney, who can help you explore options for debt relief, such as Chapter 7 or Chapter 13 bankruptcy. Additionally, you may be able to sell your vehicle privately or trade it in for a more affordable model.

Protecting Your Personal Property

If your vehicle is repossessed, it’s essential to protect your personal property that may be inside the vehicle. Under Florida law, the recovery agent is responsible for completing an inventory of the personal property found in the vehicle. You may be required to pay reasonably incurred expenses for inventory and storage to reclaim your personal property. To avoid any issues, it’s recommended that you remove all personal items from your vehicle before it is repossessed.

Responding to Repossession in Florida

If your vehicle is repossessed in Florida, you have several options for responding. One option is to redeem your vehicle by paying the full amount owed, plus any expenses incurred by the creditor. Another option is to reaffirm your loan agreement, which may involve making a lump-sum payment or modifying your loan terms. You may also choose to surrender your vehicle, which can help you avoid a deficiency judgment. It’s essential to seek the advice of a bankruptcy attorney to determine the best course of action for your specific situation.

Avoiding Car Repossession

If you’re struggling to make your car loan payments, here are some steps that might help avoid the risk that the lender will seek to repossess your vehicle: Communicating with your lender about a missing payment is key, as they may be willing to work with you to modify your loan agreement or temporarily suspend payments. You can also consider seeking the advice of a bankruptcy attorney, who can help you explore options such as Chapter 7 or Chapter 13 bankruptcy. Additionally, making timely payments and keeping your loan balance up to date can help prevent repossession.

Proactively reaching out to your car lender can sometimes lead to a more manageable payment plan or a temporary reprieve from payments, giving you the breathing room you need to get back on track. A bankruptcy attorney can provide valuable insights into whether bankruptcy might be a viable option for you, potentially offering a fresh start and a way to manage overwhelming debt. Staying on top of your car payments and addressing any financial issues early can go a long way in preventing the repossession process from starting.

Seeking Professional Advice

If you’re facing car repossession or considering voluntary repossession, it’s essential to seek professional advice. A bankruptcy attorney can help you understand your options and make an informed decision. They can also assist you in negotiating with your lender and exploring alternative solutions, such as loan modification or debt consolidation. Don’t hesitate to reach out to a qualified attorney who can provide guidance and support during this challenging time.

Professional advice can be a game-changer when you’re navigating the complexities of car repossession. An experienced bankruptcy attorney can help you weigh the pros and cons of voluntary repossession, negotiate more favorable terms with your lender, and explore other financial strategies that might be available to you. By seeking expert guidance, you can make more informed decisions and potentially mitigate the negative impacts on your financial health.

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