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Is a voluntary car repossession or bankruptcy worse for your credit?
Wiki User
∙ 9y ago
The most common type of bankruptcy is a Chapter 7, commonly called a 'straight bankruptcy'. You may be allowed to keep a vehicle up to a certain value and reaffirm the loan after the bankruptcy is discharged with the bank to continue payments.
A repo, voluntary or not, will torpedo your credit score (by up to 150 points, at worst) and that damage will weigh heavily for at least 4-5 years before falling off completley in 7 years.
Even after a repo, you are legally responsible for any balance after the bank sells the car at auction. The bank can, and often will, seek a garnishment on your wages to recover this balance. The greater the balance, the more likely they will pursue collection activity. Balances under $2000 are hardly worth the effort to sue you, but some banks do.
You would still need to file Bankruptcy and declare this balance as an outstanding debt. That would wipe out your obligation to repay this amount and prohibit any further activity against you. This will be another major slam on your credit score and the Bankruptcy record will be there for 10 years.
If the car debt is the only reason you would file Bankruptcy, you should hold off until you have no other alternatives. Obviously, if you are talking about repossession, the car payment is more than your budget can handle now- correct? Do you know how much is owed on the car (payoff balance) and if you could possibly sell or trade it in for close to that payoff or more? If so, you need to SELL the car let it get repo'd!
If the loan balance is more than the car is worth (upside-down), then a repo may be the only recourse to get out from under that monthly payment. A VOLUNTARY SURRENDER is always a better idea than allowing the car to be picked up at random by a repo company! It saves the bank from paying the repo company to locate, retrieve, store and deilver the car to them. It also eliminates the chance of any damage during the repo process or while being stored at a repo facility. You would be held responsible for it in the condition it arrives back to the lender. If you deliver it yourself, you can snap a few photos for posterity. Clean out all your belongings, run it thru a car wash and vacuum the interior before handing over the keys. It will make you look like a very mature, responsible and respectful adult even though it will be difficult. It would be easier to just let it disappear one day and not have to face the lender and hand them the keys- probably an embarrassing thing for most of us. But so few people handle it this way that it can only cast you in the best possible light.
I was told a voluntary car repo is worse, because that will be on your credit report as repo. With bankruptcy (Chapter 13) you are making payments.
In terms of credit score, I can answer half of that question. I was at a bankruptcy conference in Indianapolis last year where the speaker had worked for a major credit reporting agency for 20+ years, and he said that bankruptcy normally reduces your credit score by 75 to 150 points. I don't know how much a repo reduces your credit score, but if you can find out, you know what to compare it to. The guy said the credit reporting companies are hush hush about how your credit score is determined, so no credit reporting agency will give you a clear answer to that question, but loan officers might have an idea of what the repo would do to your score based on what they've seen it do to other peoples' scores. In terms of duration, a repo is on your credit report for 7 years, whereas a Chapter 7 bankruptcy is on your credit report for 10 years. A Chapter 13 bankruptcy is on your credit report for 7 years (same as a repo). Also, I'm not sure if credit reporting agencies even distinguish between a voluntary and involuntary repo. Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person.
A debt consolidation lawyer once said you can dispute a bankruptcy or a repossession with the credit bureaus, they have 30 days to verify, if not it must be removed. The best time for disputing these things is around Christmas or other holiday "busy" seasons. "The employees that do verifications for the CRA's are required to do 10 verifications per hour (quota), however they are only paid approx. $7/hr." (Quote taken from a report from a lawyer's research posted at the credit info center.
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∙ 9y ago
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Is bankruptcy or repossession worse for your credit?
Both, Its bad debt period and you will suffer bad with either.
Is it better or worse for your credit to let the bank foreclose on a mortgage of a second property while facing bankruptcy?
A foreclosure or bankruptcy is never good for your credit, this is something you'd be better off discussing with an attorney. You can avoid foreclosure by filing bankruptcy.
If you just divorced and already have foreclosures and repossessions on your credit report will filing bankruptcy help your credit score?
No, filing bankruptcy will never help improve your credit score, it stays on your report 10 years whereas a repo or foreclosure normally remain 7 years. So bankruptcy would only make your credit worse.
What is worse on your credit report charge offs repossessions or bankruptcy?
Any legal item that is shown in the public records portion of your credit report is a significant derogatory. That having been said; your credit rating and credit score takes into consideration ALL the factors showing. So it depends on what your definition of "worse" is. I have clients 2-3 years out of bankruptcy with higher credit scores that clients with pages of clean accounts that have recent late payments.
What worse bankruptcy or debt relief?
If you have a pile of unpaid credit card bills and simply can't pay the total amount due. Then you have two options for dealing with the debt you've accumulated: liquidation or bankruptcy. When you declare bankruptcy, you're asking court to wipe your financial slate clean.
Is bankruptcy or repossession worse for your credit?
Both, Its bad debt period and you will suffer bad with either.
What is the difference between repossession and bankrupcty and which one is worse?
For any personal credit related concerns I recomment a website that I know has many very good answers to even the toughest questions. It is an 'ask' site directly on Experian's website which is hosted by Maxine Sweet, the V.P. of Public Affairs for Experian. You can get to the site from the following link: http://www.experian.com/ask_max/index.html A repossession is the term applied to action taken on a defaulted vehicle loan. The vehicle, which is the security of such a loan, is either involuntarily repossessed (taken), or voluntarily turned in. Repossession is simply a word. The derogatory credit issue is the fact that repossession only ever follows default of a loan. A bankruptcy is a legal action with its' own set of ramifications and consequences. Consumers file bankruptcy when they are unable to repay debts. As such, it is serious and can impact their credit for up to 10 years from the date of discharge. Because bankruptcy is a legal action, it appears in the "public records" portion of a consumer's credir report. It requires a disposition, either a discharge or an order to vacate (dismissal). Consumers with ANY legal item in the public records portion of their credit (bankruptcy, tax liens, foreclosures and judgments) take larger deductions to their credit scores for all adverse activity during the reporting period. Therefore, a bankruptcy is considered "worse" on a consumers credit than a repossession.
Is it better or worse for your credit to let the bank foreclose on a mortgage of a second property while facing bankruptcy?
A foreclosure or bankruptcy is never good for your credit, this is something you'd be better off discussing with an attorney. You can avoid foreclosure by filing bankruptcy.
If you just divorced and already have foreclosures and repossessions on your credit report will filing bankruptcy help your credit score?
No, filing bankruptcy will never help improve your credit score, it stays on your report 10 years whereas a repo or foreclosure normally remain 7 years. So bankruptcy would only make your credit worse.
What looks worse on your credit report Late payments or a bankruptcy?
Bankruptcy looks worse on your credit report than a late payment. They will both drop your score quite a bit, but a bankruptcy lets your lenders know you gave up on the debts owed, so making it harder to get new loans. You can always try to contact the credit bureaus to try and dispute the negative listings and have them removed if possible.
What is worse on your credit report charge offs repossessions or bankruptcy?
Any legal item that is shown in the public records portion of your credit report is a significant derogatory. That having been said; your credit rating and credit score takes into consideration ALL the factors showing. So it depends on what your definition of "worse" is. I have clients 2-3 years out of bankruptcy with higher credit scores that clients with pages of clean accounts that have recent late payments.
Can I file a petition to stop an ex-spouse from filing bankruptcy showing it will have a greater negative impact on my financial situation?
It's a voluntary bankruptcy. That's voluntary on her part. It's about her and her finances, not you and yours. And bankruptcy is really a bad thing for the credit of the one going through it. It is considered an act of last resort. I suspect you couldn't show that it is worse for you than her...just as far as your concerned it's worse for you...maybe because you have more to lose...but her bankruptcy is worse for her than your loss to her. Yes, it will have a severe negative impact on everyone whom she doesn't pay all of what they are owed. Some of them may even file bankruptcy because of the failure to recover what she owed them. Others, like co-signers or even you if your responsible too for the debts she isn't paying, may have to pay much more than they originally expected....also a severely bad thing. I suppose if her bankruptcy is really worse for you than her so you want to do what you can so she doesn't have to do it, you would want to tell the court - (and if they agree), that you will act to cover her debts in full so she doesn't really need bankruptcy, they would be happy to entertain that.
Is a voluntary repossession worse than a normal repo on your credit report?
Sorry to say, its about 1% better than a 'normal" repo. try to sell the car. You'll get much more than the lender will at auction. Of course, you'll have to come up with the difference to complete the sale. talk with your lender about that idea. Good Luck
What is the difference in a charge-off showing on your credit verses a repossession?
In terms of credit score, about 10 points worse. You might pay off a repo so its slightly better than one that you never did anything about and the lender charged it off.
What worse bankruptcy or debt relief?
If you have a pile of unpaid credit card bills and simply can't pay the total amount due. Then you have two options for dealing with the debt you've accumulated: liquidation or bankruptcy. When you declare bankruptcy, you're asking court to wipe your financial slate clean.
Which hurts your credit worse bankruptcy or late payments?
Late payment will drive your credit score into the ground rapidly. Many people question filing a Bankruptcy even though their credit is shot through late payments on mortgages and other bills. Filing Bankruptcy put all collection activity on hold and your accounts show current and up to date as long as you make your payments on time. Most people are surprised tofine their credit in much better shape after a BK than before with a much higher credit score Late payments can always be corrected, and this will be reflected on your credit file. Bankruptcy, however, will stay on your credit file for six years.
Will a loaner accept a vehicle back voluntary return the payments are not behind will this show up as a repossesion how do you work this outwill calling them to discuss this make it worse?
Any repossession will appear on a credit report, voluntary or not. Where it makes a difference is when the potential new lender calls the original lender and finds out the situation. Lenders don't like vehicles being turned in, but it's like paying taxes, even though it is not what is desired, it happens. Calling them won't necessarily make them mad but be ready for them to try to talk you into keeping the vehicle.
