Answered on Feb 23rd, 2011 at 1:47 PM
If you let the car be repossessed, the bank will sell the car at an auction and bill her for the difference between what was paid and the amount she owes. The amount paid at the auction is usually very low as people are always looking for bargains, but if a third party doesn't buy it, the lender holding the lien on the car will credit-bid (pay for the car using the debt your daughter owes to it). In other words, there is a deficiency almost invariably. Once the lender does that, it will start trying to collect from your daughter. If she doesn't pay, the lender may itself start a lawsuit to collect or may first sell the debt to somebody else who will start the collection process again and ultimately file a lawsuit against your daughter for the deficiency plus attorneys' fees and costs, etc. Once the lender wins, it can get a judgment against your daughter and have the Sheriff start garnishing her wages. A Bankruptcy filing does stop garnishment proceedings and the benefits are maximized if the petition is filed more than a week before her employer starts taking the money from her check and sending it to the sheriff. With that said, she needs to consult an attorney as soon as possible to determine whether a bankruptcy filing is even a good option for her despite the fact that it stops a garnishment. For example, sometimes people have several hundred thousand dollars of home equity, which may force them to pay their debts in full. Of course, since the possibilities are endless, it is best to consult a bankruptcy attorney well in advance to determine how to proceed. Some attorneys offer a free initial consultation.