Dealing with Debt

questions & answers

Question: Hi my mom has a 2006 vehicle with nearly 30% interest and an 8k negative value. She has no assets and receives SS only. If she voluntarily returns the vehicle can they persue legal action? Make her pay the 8K?

Answer:

A lender is not required to accept a voluntarily surrendered vehicle in exchange for the amount of the car loan, although you may ask for such an arrangement.  Be sure the lender will agree in writing to waive the “deficiency” (the difference between the market value and the current loan amount).  If not, your mother will owe the deficiency amount although the lender may be willing to set up manageable, low payments for the deficiency balance.  Social Security benefits cannot be garnished for the loan or the deficiency, but if your mother simply defaults/stops paying, she will likely be dealing with frequent debt collection calls and letters and/or damage to her credit history for approximately seven years.