Selling Underwater Car (Senior Debt)

[AstroEng]

Hello All,

My father recently had a severe stroke and I am trying to work through his finances and figuring out what to do about them. I've found a lot of good advice about CC debt and similar, but the one issue I'm having a hard time finding a path forward on is his car.

My father is definitely not a Mustachian, and I'm sure has very poor credit. He purchased a used vehicle a couple months ago, and now that he is in the hospital, I'm getting insight into the situation via his bills (I just got POA, by the way). He apparently is paying interest only with approximately 30% annual interest on the vehicle. My first thought was obviously to sell it fast. However, a quick look at KBB and it looks like the vehicle is worth about $5k less than he owes on it ($10k vs $15k).

Given the recent stroke, he will no longer be working. Additionally, as you can imagine given his loan situation, he has no savings. I know that there is no filial responsibility, but I'm trying to figure out the best approach to resolving this.

So far, I see two options:
1) Sell the car and leave the remaining $5k. Is there a problem selling a car with a lien still on it? Obviously he has no way of paying the remaining debt.
2) Let the bank take the car back. From what I see, they will auction it and then my Dad is on the hook for the remainder - and the car will likely sell for even less if auctioned (thus more in debt)

I lean towards option 1, but worry about selling with a lien (trade in would be different). I'm looking for any other options or advice.

Thank you in advance!

[mozar]

I would go with the second option. Let the bank figure it out. Banks deal with this stuff all the time. You could also look into declaring bankruptcy for your father.

[seemsright]

We went though this type of thing last year. The difference FIL has money.

So I would do a few things. Run a full credit report to figure out where he stands. Get his credit score (this will be key in figuring out what to do)

If his credit score and credit would be worth saving do the things to do that. If his credit score is in the toilet and the statistics say he most likely wont improve it. Then I would double check your states laws on the POA and understand the medical POA...they are different depending on your state.

I would look into filling for Bankruptcy.

[former player]

You've need to get the basics sorted on what your father owns, what he owes and what his future income will be.  His full credit report will help with this but may not include everything.

Depending on what you find you should also find out the basic laws for wherever you are on dealing with debts that you can't pay and possible bankruptcy.  You should be able to find out whether the credit company will be able to sue for the money, or ask for bankruptcy themselves.  Whether they will do so will depend on whether your father has any assets that the court would require him to sell to pay the debt or whether they can require payments to be made from any future income he will have, such as a pension, disability or social security payments.

Once you know what his current position is this is probably one situation in which you can do no harm by talking directly to the lender, and it's probably best to do so before arrears build up.  If you can say to them "I am his PA, he is seriously disabled by a stroke, he has no valuable assets that a court could require him to sell and he has no income other than [something protected from a possible court order], you can have the car back and that's it" then they may just require you to confirm that in writing and then go away - no point in them taking action if there is no money to be had.  Otherwise you can work out a partial payment or a payment by instalments from what assets and income he has.  You need to make sure that you know all the debts before doing that, and agree proportionate payments to all of the debtors.

Sorry about your father's health, and you are a good person for trying to sort things out for him.

[AstroEng]

Thanks all for the responses. I hadn't thought of getting a credit report for him - that's a great idea. So far I've relied on whatever bills have shown up in the mail.

So far, from what I've read regarding his other debts (all credit cards), since his only "asset" is a house with minimal equity (possibly no equity) it looks like he would easily be "judgement proof" on the other debts. I'm working through the list of companies and waiting for them to process the POA. It's all a very slow process.

[Cassie]

I don’t think you can sell a car with a lien on it.