Lender refuses to repossess a vehicle you want to surrender

When you file for bankruptcy in Minnesota and have a car loan, you can choose whether to keep the car and continue to pay the loan, or to stop paying the loan and surrender the car to the lender.

This seems like a simple enough choice.

You can:

Keep paying for the car and keep the car
Stop paying for the car and lose the car

WHAT HAPPENS WHEN THE LENDER REFUSES TO REPOSSESS A VEHICLE AFTER YOU STOP THE PAYMENTS?

Here’s what you need to know:

Refusing to repossess an vehicle after the lender stops making the payments is a situation that the law does not handle very well
When you stop making the payments on your vehicle, the lender gets the right to repossess the car

However, the lender has absolutely no obligation to do so.

Even though you want to surrender the vehicle the lender won’t pick it up.

WHY WON’T THE LENDER REPOSSESS THE CAR?

Because often the value of the car is less than the lender would spend getting the car back and selling it.

Think about it – the lender must spend money to:

Find and tow the car
Fix it up
Find a buyer

Each one of these steps costs money, and if the car is only worth a few thousand dollars, then the lender has little incentive to pick it up, repossess the car and sell it.

WHAT IF THE LENDER DOESN’T REPOSSESS YOUR CAR?

Unfortunately, the lender also has no obligation to release the lien from the title

This means that:

You are stuck with it – if the lender doesn’t come to pick up the car
You can’t sell it – because the lender still has the lien, and selling it would be committing a theft
You must keep it – you can’t junk it or give it away either

So, what should you do?

WHAT ARE YOUR OPTIONS IN THIS SITUATION?

Fortunately, you have several options.

You could:

Ask your attorney to file a motion to redeem the car for a few dollars
Offer the lender a little money to release their lien from the title

Both of these options will give you ownership of the car and the right to sell the car, but take time and cost money.

Alternatively you could:

Keep the car and continue to use it as long as you want
Call the lender every day until they get tired of talking to you and repossess the car

One court in New England has found that when the lender refuses to repossess the vehicle or release the lien, they are violating the bankruptcy discharge.

This is not currently the rule in Minnesota as of June 18, 2012, but maybe that will change in the future.