What is a Voluntary Vehicle Repossession?

Voluntary vehicle repossession is a strategy that involves the owner of a vehicle choosing to proactively and voluntarily surrender that vehicle to the lender holding a lien on the vehicle, usually because the debtor can no longer afford to make payments on the car loan. This type of car repossession is sometimes utilized in hopes of preventing the accumulation of various fees and penalties that only add to the indebtedness, while also providing the lender with the opportunity to sell the repossessed car and partially offset the remaining balance due on the loan. Depending on local laws, voluntary vehicle repossession may or may not release the debtor from the responsibility of paying off the car loan, either through garnishment of his or her wages or some other court ordered action.

This type of repossession action is very different from involuntary repossession. With the former, the debtor takes the vehicle to the lender, along with registration and other legal documents related to the ownership. Those documents are delivered to the lender, along with the keys to the vehicle. At that point, the debtor acknowledges that he or she no longer has any claim of ownership or use in the vehicle and that the lender is free to dispose of the property in any way desired.

In contrast, involuntary repossession typically requires the lender to spend a significant amount of time and money in locating the debtor and the vehicle. Additional expenses are incurred while obtaining the necessary paperwork for a court ordered repossession and hiring professionals to collect and tow the vehicle from its location to a storage facility designated by the lender. Unlike voluntary vehicle repossession, involuntary repossession can take weeks or even months to accomplish, since the debtor may be taking steps to avoid the repossession by frequently moving or otherwise eluding the efforts of the lender.

One of the misconceptions that is often associated with voluntary vehicle repossession is that once the vehicle is surrendered to the lender, the debtor no longer has any type of financial obligation. In many instances, this is not true. Even if the lender is able to sell the vehicle and cover a portion of the outstanding car loan, the debtor is still responsible for covering the difference. Another myth insists that voluntarily choosing to surrender the vehicle will prevent the action from harming the debtor’s credit rating. Voluntary vehicle repossession does not bar the lender from reporting the repossession action to credit agencies, meaning that even with a voluntary surrender there is still a good chance that the credit rating will decrease by at least one hundred points.