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Chapter 7 car surrender issue

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  • Chapter 7 car surrender issue

    Hello all, things have been moving along pretty smoothly with my Chapter 7 and my 341 is scheduled for next week. I am mildly anxious but all in all feeling pretty good about things.

    Today, however, an issue came up that I was not expecting. I have two vehicles, one has already been reaffirmed and I notified the lender of my intention to surrender the second car. My attorney just received the surrender notice from the lender and promptly told me NOT to sign it. Apparently the bank wants the right to come after me for deficiency once they sell the car, as part of the surrender agreement. Given that the car is only worth about 2K and the loan is 10K, this is obviously not an option for me. My attorney instructed me to contact them and request to simply drop the car off a local branch with a loan officer. He didn't mention what happens if they say no.

    So my questions are #1, what DOES happen if they say no? And is this a common thing? I thought that surrendering a vehicle was pretty straightforward.

  • #2
    This is the first I've heard of a surrender agreement. I don't know why anybody would sign such a thing. It's probably unenforceable. If you don't reaffirm, the debt is discharged, period. If the creditor doesn't want you to bring the car to them, then you can drive it until they come to get it.
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

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    • #3
      Originally posted by LadyInTheRed View Post
      This is the first I've heard of a surrender agreement. I don't know why anybody would sign such a thing. It's probably unenforceable. If you don't reaffirm, the debt is discharged, period. If the creditor doesn't want you to bring the car to them, then you can drive it until they come to get it.
      Thanks for the input. I am new to all of this so I guess I thought the surrender agreement was just a normal part of the process. It only became an issue when this deficiency clause popped up. I am hopeful that the bank will just agree to accept the car at their branch. I just want this entire process to be over and done with so I can get back to life again.

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      • #4
        The "surrender agreement" sounds pretty fishy and possibly illegal. Your attorney was right to tell you not to sign. Surrenders are very straightforward: you tell the bank where to pick up the car (or ask where they want it dropped off) and that's it. If they don't cooperate, either by picking up the car or giving you a drop-off location, that's their problem, not yours, and they can't take any further action. They're entitled to take the car. That's it.
        This post does not constitute legal advice. If you use this advice instead of that of a lawyer, God help you.
        Filed CH 7: 5/11/17 341: 6/12/17 Discharge: 8/14/17

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        • #5
          I agree that your attorney did well advising you NOT to sign this. Your right to discharge the lender's debt in bankruptcy cannot be "signed away" without a formal reaffirmation agreement, so this backdoor attempt to enforce a deficiency is illegal.

          You are NOT obligated to do anything more than offer to let the lender pick up the car, and refrain from doing anything to thwart their attempts to claim their collateral, such as hiding the car. If the car is really only worth $2000 as you say, the lender probably won't bother, and you will get to keep the car for free. The only issue is that when it comes time to junk the car, you will need to find a junkyard who will take it with no title, as the lender isn't going to release their lien unless paid.

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          • #6
            Thank you everyone for your help. I put through a call to the lender today who said they would have to run things past their legal people and they would call me back shortly. No call was ever returned. I guess I will just keep driving it until I hear something different from the lender. Seems rather silly on their part but that is just my opinion.

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            • #7
              I, personally, would not waste my time calling the lender. Only go through your own attorney. Don't do the lender's work for them. They should be able to follow the law and repossess the vehicle. As bochen eludes, it just may not be worth it for them.
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog


              I am not an attorney. Any advice provided is not legal advice.

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