If you find yourself in financial difficulty and you’re unable to keep up your payments on an asset (such as a car), one of your options is to choose to return it.
This is called voluntary surrender, when you give the asset back and the credit provider sells it to pay back your debt. Unfortunately, if your asset is auctioned, although it will be sold for the best price possible, this is not necessarily the full amount you still owe. You will need to pay the rest of your debt, but at least it will be less than what you owed originally.
Voluntary surrender is only an option for secured debt (connected to an asset) not unsecured debt like a personal loan or credit card.
You need to give your credit provider written notice of your intention to return the asset. This also counts as your acknowledgement that you will need to pay the shortfall (the difference between what the asset sells for and what you owe).
To avoid getting into a situation where the credit provider institutes legal action for the asset to be returned, it’s important to take action as soon as possible if you’re unable to make your payments. Ask for help from your credit provider by discussing the possibility of a more affordable payment plan or consider options such as voluntary surrender or debt review.
Find out more about debt review, how to apply and how the process works.
Do you know the difference between debt review and debt administration?
Get some helpful tips for how to manage your debt.