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About Regan Shinski
Expertise
I can answer questions on collections, repossessions, bankruptcy, credit repair, credit counseling, FICO scores, credit planning, and the cause and effect of credit related decisions. I can also answer questions on collection settlements and preparing to sue your creditors for false debts and credit credit reporting.

Experience
Fifteen years ago I was financially devasted due to severe health issues. I filed bankruptcy, had a foreclosure, car repossession, tax lien, and ruined credit. I immersed myself in credit law. I settled dozens of accounts and had them removed to improve my credit. I personally sued four creditors and collection agencies and won cash settlements for their false reporting on my credit reports. Since then, I have completely recovered and have nearly $100,000 in revolving credit lines and perfect credit. I have owned a credit repair company for the past five years and have an additional three years of specific work in the collections and debt management industry. I am fully versed in the Fair Debt Collection Practices Acts (FDCPA), Fair Credit Reporting Act (FCRA), and have used them successfully in collection settlements and lawsuits for myself and others. I am also familiar with and abide by the Credit Repair Organizations Act (CROA). I have deleted or helped delete literally hundreds and hundreds of derogatory items from consumers' credit reports and helped negotiate many settlements with collection agencies and creditors. I have also advised people on bankruptcy at any stage. In the current credit market, I have successfully advised numerous people on how to obtain credit and how to negotiate for better terms.

Education/Credentials
BA University of Minnesota

You are here: Experts > Business > Corporate Law > Collections Law > Repo

Collections Law - Repo

Expert: Regan Shinski - 11/5/2009

Question
I purchased a car in Florida that I can no longer afford. I recently registered it in Texas (where I'm living temporarily) with the intention of selling it to a dealer, but it turns out the car is worth less than what I still owe. Since I can't afford to pay the difference, I'm considering surrendering the car voluntarily, but am concerned about being sued for the deficiency balance...not only am I worried about what it will do to my not-so-great credit, I'm sure that the dollar amount will increase substantially...true? Are there options that I'm overlooking? And...which state's laws apply?

Answer
Hi Jennifer:

The advantage to "voluntarily" surrendering it is to keep the repossession costs down, therefore keeping your shortfall balance down. There is no advantage credit-wise.

Even so, you are correct that the balance you owe on the shortfall will increase significantly. First they have to get the car as mentioned above. It could involve hiring a repo company (which they would not have to do if you bring the car to them), they have clean, detail, and inspect the car and sometimes make repairs. Then they have to sell the car in a "commercially reasonable manner." This is most likely at a wholesale or public auction. There can be fees for that. But perhaps the biggest dollar hit is the resale itself. They typically will not get anywhere close to the blue book value of the vehicle.

Basically you take the current balance, add all those expenses and subtract out the resale of the car and that is the shortfall amount you owe.

You have few options if you can't afford the car. You can try and renegotiate or refinance the car to extend the terms out and lower the monthly payment. In general, creditors don't want the car back. Still, they typically don't budge too much but you may be able to get some movement. I would definitely call them before you give the car back to try and get better terms.

Bankruptcy is an option, but not a good one at this point. If you are even thinking of that, you should absolutely wait until you see the shortfall debt and include that in the bankruptcy.

In general, the rules apply to the state you currently reside in.

I hope this helps. I wish I had better options for you. Good luck.

Regan

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