Ask The Money Coach

Posts Tagged ‘voluntary repossesion’

Q: I found out that my car company Chacon Auto is not reporting my credit after three years. If I voluntary give my car back can they report a repo although they do not report my credit now?

A: Thanks for writing me with your question about your car situation.

It is rare for an auto dealership that offers financing to fail to report a car loan to the credit bureaus. So at first, I wasn’t exactly sure why Chacon Auto has neglected to report your payment history to Equifax, Experian and TransUnion.

Continue reading “When Defaulting On a Loan May Not Be Reported to a Credit Bureau” »

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Question:

I have a question from a reader today who wanted to get some information about an auto that was actually repossessed via voluntary relinquishment. He wrote to me saying, “I’m recently divorced, and my ex decided to voluntarily relinquish a car that was in both of our names just before our divorce was final. I got a letter from a collection agency demanding more than the car was originally worth. The divorce papers state we’re equally responsible, but I know she’ll never pay because she can’t even pay child support.” He said he has custody of his child and can’t afford to pay anything at this time without some help from her in terms of keeping up with all of his other bills. So his question really boiled down to this. He said, “I pulled my credit report, and it shows the repo, but it also shows an amount on the report that is less than a quarter of what the agency is demanding. Can I use this information as a bargaining tool to get them to settle?” He also mentioned he was told to file bankruptcy, but he’d already done that back in 2005.

Answer:

First off, no, don’t think about filing bankruptcy just due to a car loan that was in both your and your ex‑wife’s name, even though the amount owed might be considerable relative to your income. What I think you should do is, yes, by all means, try to negotiate with the collection agency that has reached out to you, and let them know, in no uncertain terms, that you are cash‑strapped, that you are a single father, that you’re raising your child on your own, and that the amount that was due, obviously, you’re aware of the fact that it’s legally your responsibility and your ex’s, but that they’re asking for a multiple of what is the amount that the car was actually worth and three to four times what’s actually shown on your credit report.

Don’t be afraid to let them know that you have seen your credit report recently and that you know that there’s a huge difference in terms of the amount that they’re trying to demand and the amount that’s shown on your credit report. I would suspect that this will be a huge point of leverage to use in the course of your negotiations, because a lot of times collection agencies try to say, “Look, we’ll ruin your credit. We’ll put something on your credit report.” And your defense to that is, “Hey, the information is already there. It’s already showing up on my credit report. I’m merely trying to clear up the matter.”

What I would suggest that you do, in terms of offering a settlement amount, is either try to pay a lump sum and get it all done and over with in one fell swoop, or only commit to a monthly amount that is modest and firmly within your reach in terms of paying every single month without fail. I don’t like the idea of a monthly payment plan to pay off an old collection account, especially for a repossessed car that you’re not getting any value out of, as much as I like the idea of doing a lump sum.

If you negotiate a lump‑sum payment to pay off X amount and get this debt taken care of once and for all, try to get something called a PFD, or a pay for deletion. That’s where you agree to terms with the collection agency about an amount that will settle up the past‑due bill, and that amount will be considered acceptance of payment in full. In exchange for you making that cash payment, the collection agency will agree to delete all negative information from your credit reports, that is, from your Equifax, Experian, and TransUnion credit reports. They won’t always agree to this, but you should certainly ask for it.

If you can get them to do this and to agree to that, make sure you get a letter in writing from the collection agency, upfront, before you turn over any money. That letter would be proof that you might need later if they don’t hold up their end of the deal and if you have to go to the credit bureau and dispute the information and say, “This was supposed to have been deleted from my report because I paid it per an agreement between myself and the collection agency.”

So I hope this information helps you. Good luck raising your child.

Related articles

• What’s the Best Way to Get Negative Information Removed From My Credit Report (askamoneyexpert.com)
• Key Differences Between Equifax, Experian and TransUnion Credit Reports (askthemoneycoach.com)

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Q: I Would Like to Trade In My Car Because I am Upside Down on the Car and it Has 123,000 Miles on It. I Have a Previous Voluntary Repossession and a Bankruptcy on My Credit Report. An Attorney Recommended That I Let This Car Go and Get Another One Before it Showed Up on My Credit Report. Should I?

A: Based on all the circumstances you described, it seems you are going to be stuck with your existing car for the near term. For starters, you stated that no dealers were willing to finance you for a new vehicle without you putting down $3,000 to $5,000. I assume you don’t have that kind of cash sitting around. Moreover, you are already upside down on your car loan, meaning you owe more than the vehicle is worth. So no auto lender is going to want to touch that and a trade isn’t financially feasible. Even more damaging, at least potentially, is your poor credit history. The fact that you have a bankruptcy and car repossession already listed in your credit files may be the nail in the coffin.

If you let your current car go, and do yet another voluntary repossession, it is likely that it would take a month or two before that showed up on your credit reports. But there are already simply too many circumstances working against you for you to be able to convince a car dealer or finance company to finance or lease a new car to you. Even if you did find a rare auto finance company willing to do business with you, your loan would definitely carry sky-high double-digit interest rates, making your monthly payments extremely costly and probably totally unaffordable.

My suggestion is to tough it out with this existing car, which you said has $13,000 still owed on it. I know it also has a lot of miles on it. But with some TLC and proper maintenance, you may be able to keep it in decent running condition – at least until you can pay it off.

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