By Laura Bartels
Monica couldn’t make the payment on her car after her hours were reduced. She called the car company and told them to come and get the car because she could no longer make the payments. The company came and took the car. She breathed a sigh of relief- Phew- no more $450 monthly payments.
Six weeks later, Monica was informed that her car had been sold at an auction for $7,000 and that because she owed $17,000 on the car, she was responsible for the $10,000 difference. “But I told you I couldn’t pay for it and I gave it back to you,” she pleaded.
Many people think that if they give the car back to the creditor, they are out from under the debt. This is not true. You are legally responsible for the amount owed on the car whether you sell it or the car company sells it. You are probably going to get a better price for the car if you negotiate the sale yourself and pay the company the difference. In most cases, the worst thing is to just turn over the car to the creditor.
A few months later Monica received a summons and complaint from the creditor for the $10,000 they claimed she owed. With a judgment, a creditor can attach property Monica owns and garnish her wages.
If you are having a difficult time making your car payment, your first action should be to negotiate with your creditor. Think carefully before just handing the keys over. Remember, you won’t have the car, but you are still responsible for the loan.
Laura Bartels can be reached at LauraBartels@live.com or (805) 524-1934.
