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What We Do

Can't Afford Your
Car Loan Anymore?

Behind on payments, facing repossession, or already stuck with a balance after your car was taken back? The shortfall is unsecured debt — and a Licensed Insolvency Trustee can include it in a Consumer Proposal or Bankruptcy along with everything else you owe.

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Auto Loan
Balance$22,480
Shortfall
After sale$14,200
Notice of Default
Owed$14,200
DISCHARGED
Shortfall of Vehicle Loan Balances Included in Proposal
Stop repossession lawsuits
Include shortfall balance
Keep the car if it makes sense
One affordable monthly plan
The Basics

Why Car Loans Become Unmanageable

A car loan is a secured debt — the vehicle is the lender's collateral. If you fall behind on payments, they have the right to repossess and sell it. The problem is that cars depreciate faster than the loan is paid down, especially in the first few years.

When the lender sells the repossessed vehicle at auction, they almost always sell it for less than what you owe. The difference — called the deficiency balance or shortfall — gets added to whatever fees, interest and legal costs they incur, and then they come after you for it.

That shortfall is now an unsecured debt. There's no vehicle backing it anymore. And like any other unsecured debt, it can be included in a Consumer Proposal or Bankruptcy.

Bank Auto LoansDealer FinancingSubprime Auto LoansCar Leases
A Typical Shortfall
Sample illustration
Original loan amount$32,000.00
Balance owed at repossession$22,480.00
Auction sale price−$9,800.00
Repo, storage & legal fees+$1,520.00
Shortfall they pursue you for$14,200.00
In a Consumer Proposal~$6,000
After the car is sold, the remaining balance is unsecured — it can be combined with credit cards, tax debt and other debts into one proposal.
Your Two Real Choices

Keep the Car, or Give It Back?

When you file a Consumer Proposal or Bankruptcy, the car loan is treated separately  from your unsecured debts. You decide what to do with the vehicle.

Keep the car
If the payment is affordable and the loan balance isn't wildly more than the car is worth, you can keep paying the lender directly and keep driving it.
  • Continue making the regular monthly payment to the auto lender.
  • The car loan is not reduced — only your unsecured debts (cards, tax, payday loans) are.
  • Reducing the rest of your debt usually makes the car payment manageable again.
  • You keep the vehicle, your insurance, and your ability to get to work.
Surrender the car
If the payment is too high, the car has negative equity, or you're already in default, you can voluntarily return the vehicle to the lender.
  • Hand the car back — no need to wait for a tow truck or repo agent.
  • The lender sells the car; any shortfall after sale becomes unsecured debt.
  • That shortfall is included in your Consumer Proposal or Bankruptcy.
  • You're free of the loan, the insurance bill, and the payment.
A Licensed Insolvency Trustee will run the numbers both ways - keep vs. surrender - and show you which option leaves you with a workable monthly budget.
If You Fall Behind

What Auto Lenders Can Do

Auto financing contracts give the lender more power than almost any other consumer loan. Knowing what they can do helps you act before they do.

Repossession with no warning
After as few as two missed payments, the lender can dispatch a tow company to take the vehicle - from your driveway, your workplace, or a parking lot - without any further notice.
Shortfall pursued in court
After they sell the car, the lender comes after you for the difference. They'll typically file a lawsuit and, if they win, obtain a wage garnishment or freeze your bank account.
Collection agency hand-off
If they don't sue, they'll sell the deficiency balance to a third-party collection agency that will call daily — and continue calling until the debt is paid, written off, or included in a filing.
Credit score collapse
A repossession is reported as R8 rating — and stays on your credit report for six years. This can have significant impact on your credit score.
Future financing cut off
With a repossession on your file, prime lenders won't approve another car loan. You'll be pushed toward subprime financing at 20% - 30% — the same trap that often started the problem.
Years of compounding interest
Until the shortfall is dealt with, it keeps growing. Many auto deficiency judgments carry post-judgment interest of 10% - 29%, plus the lender's legal costs added to the balance.
How You Got Here

Car Loans Are Designed to Trap You

Almost no one walks into a dealership planning to default. It usually starts with one of three things: a longer term to lower the payment (84 or 96 months), a subprime rate if your credit was bruised, or negative equity rolled in from a previous trade-in.

Any of those three guarantee the balance owed is more than the car is worth for most of the loan. Add a job change, a separation, or even just rising insurance and gas prices, and the payment becomes impossible.

By the time clients come to us, their car is worth half of what they owe. Surrendering and including the shortfall in a consumer proposal is a helpful way to get out of car loan trap.

Still owed on the loan$30,000
What the car is worth$15,000
Negative equity
you'd still owe$15,000
More owed than the car is worth
Negative equity is the rule, not the exception. A new car loses 20 - 30% of its value the moment it leaves the lot - long before the loan catches up.
Your Options

How to Resolve Car Loan Debt

Four real paths. The right one depends on whether you want to keep the car, and on how big the shortfall is likely to be.

Four real paths. The right one depends on whether you want to keep the car, and on how big the shortfall is likely to be.

1
Refinance or Extend the Term
Ask the lender to extend the term or refinance at a lower rate. Lowers the monthly payment but increases total interest, deepens negative equity, and is rarely offered to someone who is already in default.
2
Sell the Car Privately
If the car is worth more than the loan balance (rare), you can sell it, pay off the loan, and walk away. If it's worth less, you'd have to come up with the shortfall in cash at closing — usually not possible.
3
Voluntary Surrender
Return the car to the lender yourself. Avoids tow and repo fees and is less damaging than a full repossession, but you are still on the hook for the shortfall — which is why surrender is normally paired with a Consumer Proposal or Bankruptcy.
4
Consumer Proposal or BankruptcyMost Effective
Surrender the car, then include the deficiency balance with your other unsecured debts. The moment you file, an automatic stay of proceedings stops the lawsuit, any garnishment, and the collection calls. Or — if the payment is affordable — keep the car and let the proposal cut your other debts so you can afford it.

Get Out from Under a Car You Can't Afford

Book a free, confidential consultation today. In 30 minutes, we'll calculate your shortfall and show your new monthly payment.

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Common Questions

Car Loans Frequently Asked Questions

Quick answers to what we hear most from Ontarians struggling with car payments and repossession.

Q
Can I include my car loan in a Consumer Proposal or Bankruptcy?
Yes — the shortfall portion. If you surrender the vehicle to the lender, any remaining balance after they sell it (the deficiency) becomes unsecured debt and can be included in a Consumer Proposal or Bankruptcy with your other debts.
Q
Can I keep my car if I file a Consumer Proposal?
Yes. A car loan is a secured debt. As long as you remain current on the monthly payments to the lender, you can keep the vehicle and continue driving it throughout the proposal. Many clients find the car payment becomes affordable once their other debts are reduced.
Q
What happens if my car has already been repossessed?
After repossession, the lender sells the car at auction — usually for less than what is owed — and then pursues you for the shortfall, often through a collection agency or lawsuit. That shortfall is unsecured and can be eliminated through a Consumer Proposal or Bankruptcy.
Q
What is voluntary surrender, and is it better than repossession?
Voluntary surrender means you return the vehicle to the lender yourself instead of waiting for a repo agent. It avoids tow and storage fees and is less damaging to your credit — but you're still responsible for the shortfall. That's why surrender is normally done in combination with filing a Consumer Proposal or Bankruptcy.
Q
I owe more on the car than it's worth — can I still get out?
Yes. Negative equity is very common, especially on subprime loans and 84- or 96-month terms. Surrendering the car and including the negative equity in a Consumer Proposal or Bankruptcy is often the only practical way to escape an upside-down loan.
Q
Will I be able to finance another car after?
Yes. Most clients qualify immediately after filing a consumer proposal often at better rates than they were getting while they were drowning in debt.
Q
What about a leased vehicle?
A car lease works much the same way. You can keep the lease if the payment is affordable, or return it and include any termination fees and shortfall in your proposal or bankruptcy.