debt

The debt stays even if car goes back

Steve Bucciq_v2.gifDear Debt Adviser,
I was laid off in November 2008 and was almost hired by a company (where) I would have enjoyed working. But when they did a background check on my credit, they saw that I had a judgment. This judgment was from a vehicle that I voluntarily returned to the dealership back in 2006. The dealership/finance company did sell the vehicle, but it stated that I still owed the balance, based on storage, attorney's fees, etc.

The amount is almost $5,000. I still don't have the funds to pay that debt. Why am I being charged when I returned the vehicle, and how can I get this matter resolved and get hired? I'm still unemployed. I'm in the finance industry. Do I need to change careers?

Hope to hear from you.
-- I.H.C.

a_v2.gifDear I.H.C.,
There is a huge difference between working in finance and understanding finance companies! So pleading ignorance does not mean you should change careers. You are not alone in believing that once you have surrendered your car to the finance company, your debt obligation ends. However, as you have learned, that is not the case.

You signed a contractual agreement with the company. The fact that you returned the car does not void your agreement. You are responsible for the balance left unpaid on your loan once the car is sold at wholesale auction.

Not only are you responsible for that debt, but you also are responsible for the expense that the company incurred as a result of your voluntary repossession, including storing and transporting the car before auction, legal and other fees, and the ever-popular interest charge on the daily balance owed.

A concern I have is that you were not aware of the judgment on your credit report. Further, you didn't know that most employers check credit reports before making a hiring decision. When searching for employment, an apartment, insurance, credit or anything else where your credit history may be checked, you want to know in advance what the person looking at the credit report will see. Why? Because when seeking a job, you will want to address any negative information on your credit report before the potential employer discovers it.

It is always better to let the employer hear about anything negative directly from you rather than learn it from another source. It's much easier and safer for the employer to just move on to the next candidate rather than ask you for an explanation. Plus, it would have been particularly dicey in your line of work to admit not knowing that you owed money, didn't understand a contract you signed and missed a court date.

Moving forward, I would suggest you take the necessary steps to begin to pay off what you owe on the judgment for your vehicle. You may not have the funds to pay the entire amount, but contact the lender and begin the communication regarding the debt. Let them know that you were unaware of the balance owed but that you are currently unemployed and unable to make a full payment. Let the lender know the amount you can afford now and that you will work to pay the balance off more quickly when you are once again employed.

One last thought: As you continue to look for a position, keep in mind that you need to be upfront about the judgment on your credit report. Diffuse that bomb by telling the potential employer that you are working to correct the situation and that you have a financial plan in place to avoid such situations in the future.

Good luck!

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