Can My Car Lender Take Money From Other People I Paid? – Tom


Dear Steve,

I took a 6 year car loan out on a car with a trade in that added debt to the loan- lost my job and can’t afford the $1000 to mange car payments etc

Considering a voluntary turnover of the car to the finance company. I had a small amount of money saved and have had to pay rent,medical bills car payments etc – I know between all the fees after the wholesale of the car, and such, I could still owe close to $15,000+.

Can the Finance company come after people who I have paid in past 120 days- somewhat like in a bankruptcy preferential payments made 90 days prior to declaring bankruptcy – put those who have received a payment at risk of owe or have their account attached.

Thank you,



Dear Tom,

I think what you are asking is if the finance company would try to go after others you might have paid instead of them.

There isn’t one case I can think of in all my years where that happened. I don’t even think it is possible. But it is certainly something you should discuss with your bankruptcy attorney.

In a consumer bankruptcy you can hand the car back and not have to worry about any balance due. Bankruptcy will also stop any suit against you by the lender if you file bankruptcy prior to being sued.

Without filing bankruptcy I would expect the lender to pursue you, through any legal means necessary, to try and collect on the massive bill due. In either a voluntary or straight repossession the debtor loses.

The lender will typically sell the vehicle at public wholesale auction where it will sell for a fraction of the retail value. The lender can then attempt to collect the difference between the low sale price and the total amount they claim you owe.

To make the situation even more strange, you should expect to receive a 1099-C tax statement at the end of the year which accounts for the unpaid debt that was forgiven. You will have to pay income tax on the forgiven debt up to the point where you are insolvent. And you would still have to pay back the forgiven debt. You get kicked twice when you are down.

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However, filing a consumer bankruptcy will stop all of that from happening and make the forgiven debt not taxable.

So there are many reasons to carefully think about meeting with a local bankruptcy attorney and exploring that option further.


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