Surrendering a car, but there is some body damage to it. What happens....

[lookin4info]

I have a friend who is filing a Ch 7 and giving his car back. About 6 mos. ago, he scraped the side on a huge boulder in a parking lot when making a turn. There is paint missing and some rust now appearing. Since he had a $500 deductable, he had a friend who does body work and was going to fix it for him for less than the deductable, but he just never got around to it. BK was not in the picture at the time. It also has bald tires which he was also going to replace but doesn't want to now since he is surrendering it. Will there be a problem with the damage that has been done to the car and the bald tires? Other than those things, (which I guess is enough) the car is ok. He paid on it for a year if that makes any difference. I told him I would ask this question because this forum is so helpful. Thanks!

[JackBondLove]

I don't think it should matter one bit. So the car is worth a little less - big deal! The only possible issue would be if an insurance claim were filed, but the insurance award was not devoted to restoring the car, in which case the car lienholder could have first dibs on that amount, possibly even forcing that amount to be non-dischargeable if it has already been spent.

[tcreegan]

Hi lookin4info,

If it was not deliberate it doesn't matter. The rust proves it happened before the BK was in sight. If your friend is surrendering the car in the BK, the lender gets it 'as is' And they cant sue for the difference in value.

Hope your friend does well on his filing!

Tom in Colo

[lookin4info]

Thanks for the replies. I will forward them on. He did not file a claim for the damage. His friend was going to fix it for far less than the $500 deductable so he didn't bother. At that time, he had not considered BK and fully intended to pay the loan until the end.

I had just seen a couple of instances where the lender tried to file claims with the insurance companies after the car was returned and that concerned him. He was insured at the time, but afraid that the ins. wouldn't pay because of the time that elapsed if they did file a claim and he would be in trouble. Besides, with the deductable, it would fall back in his lap. His is financed thru the dealer instead of a bank if that makes a difference.

Thanks so much. Can they file a claim with his ins. company. They wouldn't have any details as far as the date and what happened, etc.

[tcreegan]

Hi lookin4info,

Credit unions play by slightly different rules, dealer vs bank doesn't make any difference. Actually "dealer financing" = use someone off their list of lenders.

When the car goes back to the dealer/finance company, they can file a claim w/ his insurance but they won't. Because they know the insurance company is going to tell them to take a flying leap. Like you said, no date, no police report, no details = no way no insurance co. is going to pay a claim. And he doesn't "owe" the deductible, don't let anyone talk him into that.

What the lender will do is sell the car at auction. Two ways to go....

Auction sale price greater than loan balance: Auction price minus loan balance minus costs of sale = equity they pay back to your friend

HA! Like that ever happens....

Auction sale price less than loan balance: Loan balance + cost of sale minus auction price = deficiency.

What they will do is sue him for the deficiency amount.

But if your friend declares BK, none of this makes any difference to him. He lists the dealer/finance company on the creditors list and they get to keep the car and the deficieny.

Hope this helps,

Tom in Colo