Unable to pay for your house or your car anymore?
Can you simply make a voluntary deposit of your assets if you have difficulty paying for them?
You are having problems making your payments and would like to know if you can simply give the keys back to your mortgage or car lender? But is this possible?
Yes, but unfortunately, it is not without consequences. Indeed, if you stop paying your mortgage or car loan, your creditor is faced with two possibilities:
- Either they repossess the asset to become the owner; you are then freed from your debt (this is referred to as a “taking in payment”).
- Or they force the sale of the asset in question; you then remain responsible for the loss they will incur (“foreclosure”).
As you might suspect, 9 times out of 10, the creditor will choose the second option. And a forced sale of an asset rarely happens at the best possible price, so the loss could be significant.
Effects on your credit report
In either case, be aware that your credit report will be significantly affected. Indeed, the voluntary surrender of a house or a car automatically generates an R-9 rating, which is the worst. If the bank chooses to “take in payment” the house (or car), your debt will be erased and you would at least have some benefit. But if the bank chooses to force the sale of the house (or the car) you might be faced with a loss and a bad credit rating.
Discuss Solutions with a Professional
So, what to do when you can no longer make house payments? The 1st step should be to complete an analysis of your financial situation with the help of personal finance advisors such as the ones at Jean Fortin. We often focus on the bigger problems but if we can solve the smaller ones instead, it can make the difference between being able de keep your house or car or not.
If paying for the house is really the only problem undermining your personal finances, sometimes a frank discussion with the mortgage lender can lead the way to an agreement that will give you time to sell your house. As the selling price is, unsurprisingly, higher when the owner sells their house than when it is a foreclosure, this will limit your losses.
A consultation, by phone or in-person, with us will allow you to know all your options. It’s quick, free, and confidential.
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