While hiding from abusive ex, she falls behind on loan payments

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Dear To Her Credit,
Last June, I had to relocate to a different state due to domestic violence, stalking, harassment and death threats made to my children and I from my ex. I've been in hiding until recently. When this happened, I had just gotten a loan on a car. Because of relocating and going into hiding, I have not been able to pay on the vehicle.

I am not sure what to do at this point. I really love the car and would like to get current on it, but I'm not sure the dealership will work with me on it or if it's financially possible at this point. Can you please give me some advice as to what to do?  -- Chrysta


Dear Chrysta,
I can see why you want to keep your car. Your car gives you not only transportation, but a place to keep your belongings. It's one point of stability in what must be an incredibly difficult situation.

If you have had your car for six months, however, and you have not been making payments on it, you are already in danger of losing your car at any time. In most states, creditors can move very quickly to repossess your car when you are late on your payments. In fact, lenders can take your car if your insurance has lapsed, even if you are not behind on payments.

You have three options at this point:

Work something out with the dealership. If you have not been in contact with the lender, you're not in the best position to work with them. You should always contact creditors as soon as you know you cannot make a payment -- not after you have missed several payments.

If you have a job or other source of income now, the dealership may work with you. That's only likely, however, if you convince them that they are better off letting you catch up with your payments than they would be if they repossessed the car.

The problem with a reprieve in payments is that if you can't afford to keep up with the payments, you're going to have difficulty catching up and keeping current. The longer you go without being able to make payments, the more you owe and the less your car is worth. At some point, a repossession company is going to take your car.

Surrender the car. If you can't make the payments or work out a plan with the dealer, it's better to turn in the car than to wait for them to come get it.

When you give up your car or it is repossessed, your troubles aren't over. You can still owe a deficiency balance -- the difference between the amount the finance company gets when it sells your car and the amount you owe. You have no control over the selling price of the car. If you let the car be repossessed, the costs of repossession are deducted from the amount the lender gets for the car.  

In addition, having a car repossessed will damage your credit history.

Sell the car. By selling the car yourself, you may get a better price for the car and retain some control of the situation. If you have money left over after you sell the car and pay the loan, maybe you can buy an inexpensive car. Otherwise, you may need to do without a car for a time.

As much as you would like to keep your car, it may be impossible if you don't have enough income to make the payments. Every month you keep a car you can't really afford, you're sliding further in debt.

You've shown courage and determination by taking your kids to a safe place. Best of luck to you as you and your family build a new life.

See related: Old car debt hounds ex-wife, Behind on car lease payments. What to do?

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Updated: 03-22-2019