The debtors knew it was bad; but they had no idea it was coming to the point where creditors are passively refusing to pick up vehicles which have been surrendered in bankruptcy. What's happening? Post-bankruptcy debtors are finding that cars, motorcycles, ATVs, jet skis and recreational vehicles which they have surrendered in bankruptcy are not being taken back by lenders in a timely fashion. Why? Quite simply, the lien holders don't want them.
Surrendered vehicles are flooding the market, thus reducing their value because so consumers are unable to pay their loans. Because of the reduced vehicle’s value, many lenders don't find it profitable to complete the repossession on these vehicles even if they were surrendered in bankruptcy. Well that must be a good thing, right? Not exactly. While in theory getting a "free" car may benefit the post-bankruptcy debtor, in reality, even if the lender never picks up the car, they are not required to give the debtor title.
But what the debtor is stuck with is the responsibility of maintaining and paying insurance for the encumbered vehicle. Debtors are also at risk for incurring costs and liability from accidents involving the vehicles. Will the post-bankruptcy debtor be responsible for repairing a car which has been damaged while sitting on the street? How about parking tickets and other expenses attached to owning a vehicle? Yes, the post-bankruptcy debtor is at risk of incurring new debt associated with the car and there is no way to legally force the creditor to come and pick up the car.
So how can a post-bankruptcy debtor take some actions to protect themselves? Other than simply leaving the car in a secure location which can be easily accessed by the creditor and then mail them the keys via insured, certified mail. The risk with this last option is that if the car is damaged, towed or stolen, the debtor could be held liable. Instead, a licensed and insured company like Collateral Bankruptcy Services, LLC (CBS) can offer assistance and a solution to these and other problems a debtor may face. For a list of all of the services CBS provides, please visit our services page.
Reed Almand is a bankruptcy attorney located in Dallas, TX who assists consumers in filing bankruptcy and surrendering their cars in a Chapter 7 Bankruptcy. The above is in part a summary of certain excerpts from his July 2011 blog post documenting problems that potentially jeopardize a debtor’s fresh start associated with surrendering their automobiles incident to a bankruptcy filing. The blog may be reviewed here in its entirety.