Selling an old car for scrap may come back to haunt you
You purchased an older car through financing, and the old clunker finally stops running, so you sell it for scrap for $200. You stop making monthly payments on the car since it technically no longer exists. Do you have anything to worry about?
Yes, you probably do, according to the Illinois State Bar Association. First, you may not have had the right to sell the car for scrap. Only the owner of the car has the right to sell it or destroy it. Depending upon the terms of your loan, the finance company, not you, may have legally owned the car. Most of the time, the business or financing company which loans you the money to purchase an item - be it a car, a house or a television set - retains the title to the property until the loan is paid in full.
Whether or not you are within your rights to sell the car or any item you purchase on time, you are still obligated to make your loan payments. Your obligation to pay is not contingent upon the existence of the property, unless there is a paragraph in your loan agreement that specifically gives you the right to stop making payments.
Just because the finance company cannot repossess the car, doesn't mean that it does not have other options to seek redress. The company can sue you for the unpaid balance on your loan, and they can also report your failure to make payments to a credit-reporting agency. This would harm your ability to get credit in the future.
Note: This information was prepared as a public service by the Illinois State Bar Association and is a joint project with the Illinois Press Association. Its purpose is to inform citizens of their legal rights and obligations.
© Illinois State Bar Association
If you have questions about the application of the law in a particular case, consult your lawyer. The law is constantly changing. Information on this site or any site to which we link does not constitute legal advice.