Can I give up a car in a bankruptcy or a consumer proposal in Sarnia?

by Joel Sandwith on February 7, 2011

One of the most frequently asked questions we receive is “will I lose my car” in a bankruptcy or consumer proposal?  In many cases the answer is no – in fact, if you are interested in that answer, have a look at this blog I wrote last year.

Having said that, one question that also pops up from time to time is:  can I give up my car if I file a bankruptcy or consumer proposal?  There really are some situations where a car payment is simply too high, or the vehicle you are paying for is not worth paying for any longer.

So, what can be done?  If you voluntarily return a leased or financed car, or if it is repossessed from you, in Ontario, the financing company can come after you for the balance after they resell the car.

Let me give you an example.  Let’s say you owe $15,000 on a car and can no longer afford to make the payments.  If the car is repossessed and sold by the dealer or the bank, there could be a large shortfall, perhaps thousands of dollars.  If you file a bankruptcy or a proposal, this shortfall can be included, and discharged, or cleared, along with most other types of debts.

Now, what if you still have the car when you come to see us, and you’d like to get rid of it and lose the car payment?  The most important thing to do will be to express your intention to surrender the vehicle, and to stop making payments on it right before you file.  If you make payments on the car after you file, or express your intention to pay for it and change your mind after you file, it will be too late.  Also, it is vital wherever possible to maintain insurance on the vehicle until the bank has taken possession of it – to protect yourself from significant loss if damage occurs.

To explore this in more detail, please call us toll free at 310-PLAN.  Let’s get started on a plan to deal with your debts.

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