My response:
The following is a direct quotation of my friend, Steve Halket, who is a terrific contributor to FreeAdvice, to a similar post, as follows:
"Lets say that you owe $5000 on a car that is only worth $4000. That means you are upside-down in the amount of $1000. At best, the dealer will only give you something less (far less) than the $4000 book value (after all, he has to make some when he sells it for $4k), lets say he gives you $3000 credit and you buy a car for the $3k. YOU STILL OWE $2000 ON THE ORIGINAL NOTE and you are now driving a car that you can only sell for something LESS than $3k!!!
Your best bet is to try to sell the car for whatever you can get (rather than a voluntary repo). Lets say that you sell that same car for $4000 (book value). You at least are out from under the car and have to make up ONLY $1000 loss. Heck of a lot better than being out $2000 and having a clunker to try to drive/sell/repair.
Bottom line....
If you let your car go into a voluntary reposession (or decide to renege on your lender agreement), here is what will probably happen.
1) Your car is reposessed and sold at auction. Any amount recovered at auction will be deducted from your debt. Costs of repo and auction will be added. Example: if you owe $5000, costs of auction (towing, paperwork, etc.) are $500, you now owe $5500. Car sells for $3000 in auction, you get that as a credit. Your debt is $2500 ($5500 less $3000 auction).
2) The lender could file a lawsuit against you for his damages ($2500 plus legal fees plus costs).
3) Lender gets a judgment against you and after investigating your assets, finds property in your name, not protected by homestead. He then exercises . . . seizure laws and has the sheriff sell your property at the courthouse steps. If the property sells for an amount over the mortgage remaining, he (judgment creditor) recovers his judgment amount from the proceeds of the sale with whatever remains to you."
I certainly hope this answers your questions.
IAAL
