voluntary repossession denied?

[daveindelaware]

I've been paying off my minivan for what seems like forever. But recently the way the economy and our finances have been, it's just not possible to continue with the payments. We're a few months behind.

I told the people who I have the loan with that our financial situation is not looking good, and we're all out of "postponements" and "refi" and whatever with the company.

I told them that I'll drive the van down to them and give them the keys (voluntary repossession), and they said "we don't want it" and they're going to begin the legal process.

Um what?

In the meantime they suggested that I can find someone to buy it, or find a junk yard to pay me a little money for it. And as long as the loan company "agrees" to the amount, they'll put that amount towards my balance that I still owe.

I recently received two Summons documents from JP#17 regarding my minivan. The loan company is wanting their money from me, even though I can't afford it any longer.

The court documents tell me that I can NOT damage or sell the property in question, yet the loan company wanted me to sell it.

I'm confused.

The collateral for the loan is the minivan, but the loan company refuses to take it back.

And the loan company told me to sell it, but the court says not to.

What can I do? What are my options, other than winning the lottery to afford this loan payoff?

[motherof3]

The only thing I can tell you is my sister in law had a car a few years ago that she let them come and repossess. The loan company sold her car at auction for way, way less than it was worth. Then took her to court for the remainder of the loan. They garnished her wages and she is still paying on that car out of every pay check she gets. Good luck man. I really don't know much more about stuff like this, just my SiL horror story.

[Bellicose]

I am going to take a wild guess and say that the loan company is not actually a Auto Loan Company, correct? Basically you had the title, and used the van as collateral. Not you went and purchased said van, and they found you a loan.

If it is the former, than I am guessing that is why they don't want it.

Either way, the are going to reposess it. If you voluntary surrender, it goes onto your credit as that, but you are still liable for the money after they sell your car, real cheap. It does not hurt your credit as bad, but it still goes on it, for I believe 7 years. If they repo the car, it hurts your credit a little more, but the same thing happens. They sell it, you are responsible for the remainder, and it still stays on your credit for 7 years. Ether way you are responsible for the remainder, whether you give it to them, they take it, or you sell it. If you sell it, then chances are they are going to want the remainder of the money as soon as you turn in the money you got. Also chances are, no one is going to want to buy it, if you don't have the title in hand, or can produce said title in a week or two at most. I say let them take it, and they will have to deal with it, since they won't let you surrender it. Sucks either way, good luck!

[Joe Walther]

I've been paying off my minivan for what seems like forever. But recently the way the economy and our finances have been, it's just not possible to continue with the payments. We're a few months behind.

I told the people who I have the loan with that our financial situation is not looking good, and we're all out of "postponements" and "refi" and whatever with the company.

I told them that I'll drive the van down to them and give them the keys (voluntary repossession), and they said "we don't want it" and they're going to begin the legal process.

Um what?

The critical thing to keep in mind is the fact that Delaware is one of the most creditor-friendly states in the country, which seems counter-intuitive for a state that has always been mostly a blue state.

Lenders usually do not begin the legal process until a loan is delinquent 90-days. However, they'll do it sooner if the account has a delinquency history. Regardless, lenders have a legal right to begin the legal process the second a loan goes delinquent. They don't do it, though, because the courts get snotty has hell with lenders who don't provide borrowers with a reasonable chance to mitigate the situation.

As for volunteering a repossession, in civil law, a repossession is a repossession. Whether you hand them the keys or they sneak through your neighborhood a 2 AM and tow it is immaterial. Also, a repossession does not end a lender's claim to a balance paid in full.

Some lenders repossess and others do not. It depends on the age, condition, and blue-book valuation of the vehicle. At any rate, doing so adds to the balance due on an already badly delinquent balance. It's a judgment call on the lender's part.

The fact remains that a repossession has nothing to do with a borrower's legal obligation to pay the balance in full according to the original agreement. When borrowers sign loan agreements in the purchase of personal property, they sign a confessed judgment, bond, and warrant. It's this little goodie that gives the lender the legal ammunition to go after assets.

It also sets forth the lender's right to accelerate the balance due to a demand for immediate payment in full. Once they've declared the loan in default and they've notified you of the demand for payment in full, they can proceed with court action if you fail to comply.

You've indicated receiving documents from JP Court #17--located in Georgetown, DE with jurisdiction over civil matters only--rather than being served a summons from the Court of Common Pleas. This tells me that the outstanding balance, including legal fees and other collection costs are less than $15,000, which is the upper financial jurisdictional limit for JP Courts.

The Court of Common Pleas has a much higher jurisdictional financial limit: less than $50,000. However, I suspect that they're going through JP (aka small claims court) because it's a lot cheaper; it does not require the services of an attorney.

When the return is relatively small and a lender is "judgement proof," small claims court is the only viable option. Judgments at this level are good for 5-years--accruing compounding interest until paid--with the possibility for reactivation at the end of that period.

Obtaining a judgment is one thing, collecting on the judgment is another matter altogether. If a borrower has no liquid assets (cash or others easily convertible to cash) collection options are limited to wage garnishments.

If a borrower has a job--and keep in mind that if a spouse's name is on the loan agreement, the liability is JOINT--the lender can seek a wage garnishment. But, even this is not a guarantee.

If a borrower's disposable income--total disposable income if the liability is joint--falls below the lower limit for wage garnishment (minimum wages), there will be no garnishment. Otherwise, the court will use an obscure calculation to determine the amount of pay-period garnishment. Percentages vary, but it hovers around 10% of disposable income or disposable income minus $217.50, whichever is less.

As an example, if a borrower's disposable income is $250 a week, a 10% garnishment will equal $25 a pay-period, which is less than $250 minus $217.50 (comes to $32.50 a pay-period). (The $217.50 is what one would earn working 30-hours a week at a minimum wage of $7.25 an hour.)

The fact is that if the lender sues you in JP Court and you do not have material evidence that you DON'T owe the money, the presiding magistrate is going to render judgment to the plaintiff. The fact that you don't have the money is immaterial.

But, as I wrote above, collecting on the judgment is another matter. Even if borrowers are "judgment proof" at the time a judgment is awarded, it does not mean that they'll remain so for the duration of the judgment period. At whatever point the judgment status changes during that period, the judgment will rear its ugly head, including the accrued compound interest.

In the meantime they suggested that I can find someone to buy it, or find a junk yard to pay me a little money for it. And as long as the loan company "agrees" to the amount, they'll put that amount towards my balance that I still owe.

You have an outstanding balance; you do not have outright ownership of the vehicle. The lender has a legal right to nix any deal they think is not in their best interests.

I recently received two Summons documents from JP#17 regarding my minivan. The loan company is wanting their money from me, even though I can't afford it any longer.

Immaterial. The court has no idea that you can't afford it. It is only interested in whether you signed a contract that holds you liable for repayment.

The court documents tell me that I can NOT damage or sell the property in question, yet the loan company wanted me to sell it.

The loan company did this PRIOR to filing the pleadings with JP Court #17. Once they did this, the entire matter fell under the jurisdiction of the court. Its rules apply.

The collateral for the loan is the minivan, but the loan company refuses to take it back.

This is true, but surrendering the collateral does not satisfy the loan agreement unless its sale results in an amount sufficient to pay off the balance due. They can still sue you for any shortfall. As for them refusing to take the collateral back, they have every right to refuse. They're not in the business of auctioning off vehicles; they're in the business of lending people the money to buy them.

Whatever you do, do not fail to show up for the hearing. If you do, the judge will render a default judgment and you'll forfeit any future right to plead your case. I'm assuming that there are no statute of limitations issues involved or anything else for that matter that might render their claim invalid.

But, regardless, you have to show up to make your points or to have any chance of reaching any sort of compromise settlement.

[longnecker]

The value of the van drops everyday. They have a full legal right to the full amount owed to them and a duty to their share holders to get it. Unfortunately if they just said "Ok we understand" to folks in your position the company would end up in bad financial shape and these nice folks would not be able to pay their bills either. This economy sucks.