Texas Laws on Voluntary Repossession

By Tracy Hodge
Returning the car voluntarily is known as voluntary repossession.
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Texas residents in default on their car loan may offer to return the car before it is repossessed by the lender. This is known as a voluntary repossession and it can have a negative impact on the car owner's credit score and the lender may still be able to file a lawsuit to collect any deficiencies that may result once the car is sold.

Default

Texas car owners may face repossession if they are in default of their loan. Car owners may realize they cannot make the required payments on the car and may offer to return the vehicle to the lender before the lender can repossess it. Common reasons for default of a car loan include failure to pay the required car payments, allowing insurance coverage to lapse and making less than the full payment each month.

Deficiencies

In the event a car owner voluntarily returns the car to the lender, the lender is still entitled to file a lawsuit to collect any deficiencies that may result from the repossession. A deficiency is the difference between the amount the car owner owes on the car and the total amount the car actually sells for at auction. Lenders who sue car owner's for a deficient balance after a voluntary repossession may also collect other fees associated with the repossession of the vehicle such as sale preparation costs and legal fees.

Effects

According to the Federal Trade Commission, consumers who agree to a voluntary repossession of their car may reduce their costs associated with the repossession of the car. However, even if the car is returned voluntarily by the owner, the lender may still provide information to credit bureaus regarding late payments and the repossession will still be entered on the credit report. Car repossessions stay on the car owner's credit report for a period of seven years.