There are few popular myths about voluntary repossession, which is when you give the home or other property back to the bank to avoid going to court for foreclosure and having the property repossessed.
Many fall victim to people and companies who prey on their victims’ lack of knowledge about the common myths surrounding voluntary repossession.
Homeowners facing foreclosure are already worried and stressed so they are often easy prey for con men and companies looking to make a quick dollar by encouraging them to believe the myths about voluntary house repossession that are so common these days. They offer a quick solution to your financial problems but really they are just trying to take your money.
Anyone facing a foreclosure process should research any company that says they can help them and check with the Better Business Bureau to be sure they are legitimate. Also, it is a good idea to talk to a real estate attorney about voluntary repossession and what it means for you.
What are the common voluntary property repossession myths?
Myth 1: Voluntary repossession will not damage your credit score
The companies who approach homeowners about helping them out of foreclosure like to insinuate (but not say directly) that going through voluntary home repossession is a better choice for your credit than foreclosure or involuntary repossession.
The credit bureaus do not differentiate between voluntary repossession and involuntary repossession with regard to your credit score. They both are very bad for your credit score and will affect you for seven years after being repossessed. The same is true for voluntary repossession of a car, a stereo or any other item you have bought on credit.
Myth 2: You do not owe any more when you do voluntary repossession
Companies who approach you about voluntary repossession will also insinuate that you will have no more legal debt for a property after you go through voluntary property repossession. The problem is that the property may not be valued at the same price it was when you bought it.
For example, a home or vehicle you give up through voluntary repossession may not sell for the full value of the loan. That means even if you have paid for years on the property or vehicle, you will owe the difference between what it sold for and what you have paid plus the remainder of your loan. If you have a co-signer on your vehicle or property, he will be held equally responsible and will have his credit score hurt as well.
Myth 3: You do not pay any fees when you go through voluntary repossession.
Voluntary repossession is a legal process you must go through so you have to pay the costs associated with the court process and all legal fees. You do not pay as much as if you had the property repossessed but you do have to pay interest, possible storage fees and of course, legal fees.
Make sure you get all the information you need from the bank or lender that owns your property before going forward with voluntary repossession. If you are confused about how the process works, talk to a reputable credit counseling group or an attorney.