The Difference Between Voluntary Repossession and In-Voluntary Repossession

Your car isn't just to get you from Point A to Point B, but it is often a means for transportation to and from work. However, owing a car and being able to have a driver's license is a privilege that many Canadian's get to enjoy, until they can't.

While many think that the recession of 2008/2009 is far behind us, the fact is it may not be. More and more Canadian's are facing financial challenges and are living paycheque to paycheque. What they don't realize is that the vehicle sitting in their driveway could be the biggest hindrance to your credit and ability to pay.

Chances are your Automobile Loan is secured against your vehicle, in Ontario we refer to it as a PPSA. When your loan is secured, you give the right to your lender to repossess your vehicle.

There are two ways that repossession can take place:

1. Voluntary Repossession:

This is when you return to the vehicle to your lender (lien holder) without actually having your lien holder execute any type of repossession that could amount to significant costs. This is the most cost effect way for someone to give up their vehicle. Essentially, you return the vehicle and sign over the ownership to your lien holder. The lien holder will then sell it an auction house. Unlike In-Voluntary Repossession, there will be no towing fees, storage fees, and bailiff fees. Saving you hundreds, if not, thousands of dollars. Your credit rating will reflect the same as a In-Voluntary Repossession and (I8 Rating), unless you make payment plans for your deficiency balance with your lien holder. Often, the lien holder will advise you as to your deficiency balance from the sale of your vehicle at auction. In some provinces, your lien holder may not be able to collect a deficiency balance as some provinces have seize or sue law. Ontario is not one of those provinces. In Ontario, lien holders still have the right seize and sue for the balance of loan even after auction.

2. In-Voluntary Repossession:

Many think you can ride and hide your vehicle. If you can't pay, you can't ride and play. This is the most expensive way to avoid paying your debt. Unlike Voluntary Repossession, you will likely face heavy bailiff's fees, towing costs, storage costs and refurbishing costs. All of which added to the balance of what is owed to the lien holder, and then sold at auction. A credit rating of I8 is often first reported to the Credit Reporting Agencies, Equifax and TransUnion, and then later reported as an I9. I9 represents that the debt is bad, sold or transferred to another party. Don't be surprised if your lien holder sells off your debt to a debt purchaser who will enforce and take every legal action to recover this money.

Solomon Jones LLP provides affordable legal services for clients located in Markham, London, Peterborough, Richmond Hill, Newmarket, among other places.

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