Legal Question in Credit and Debt Law in California

Re: auto loan

She would be better off selling it herself. If she turns it in, it will be sold at auction. She's liable for the difference between what's owed and what they get at auction. Oh yeah, the voluntary repossession will wreak havoc on her credit score.

Re: auto loan

There really isn't a way of "returning" the car without penalty. If she wants to avoid damage to her credit, she needs to sell the car with sufficient proceeds to pay off the loan before she starts defaulting on payments. If she cannot do that, then she needs to negotiate a voluntary surrender of the car to the lender. In general, the lender has the right to re-sell the car at a wholesale auction, and the difference between what they recover at auction, and what your daughter owes on the loan is then immediately due and payable to the lender. This is called a deficiency, and it can be a very large number as the lender does not have an obligation to sell the car at auction for true "fair market value," and often they sell them at deep discounts to get it off their books. If she can pay the deficiency immediatley (which doesn't sound like its the case), she may not have much damage to her credit, though it will probably reflect a voluntary repossession of the car. If she cannot pay that amount, it will be reflected as delinquent and seriously damage her credit. In negotiating the voluntary surrender (if you can't sell the car), the best you can do is hope to negotiate some sort of payment plan to pay off the deficiency over time. Its still going to damage her credit, but much less so than an unpaid deficiency, or worse yet, and eventual bankruptcy. Best bet - do everything possible to sell the car, even if she has to borrow money to pay the loan off in full.

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