Repossession Takes You Down
Rich is thinking about letting his car go into repossession so he can start over with his finances. REALLLY bad idea, says Dave.
QUESTION: Rich got divorced a year ago and had financial troubles. He lost his house in a foreclosure and has a $700 truck payment. He makes $50,000 a year. He owes $30,000 on the truck and it will bring $23,000 from the sale. Should he let the bank repossess the car so he can start over from square one? It’s vital that it doesn’t get repossessed, says Dave.
ANSWER: Not if there’s any way to avoid it. You should get it sold. Start to negotiate with the finance company to sign a note for the difference. I’d rather owe $7,000 than $30,000. You’ve got to get out of the truck, and you can’t have it repossessed. If you sell it for $23,000 and get a loan for $7,000, that’s one thing. But if they repossess it, they will sell it for $15,000 and they’ll sue you for $15,000.
The problem with the repossession is it messes up your credit, but you also lose control of what it sells for. It will sell for nothing, and you’ll get hammered. Determine what the car will really sell for, sell it and get an extra job to keep it from getting repossessed.