Hello,
 
I bought my car in 2001 and since my credit was so bad that my APR was extremely high. Basically I am upside down and owe way more then the car is worth. My car damage is more then the car is worth, I still owe $10,000 on my car which blue books between $3,000 - $5000 in good condition. Now that the car is a little wrecked I might have to voluntary repo it or file chapter 13.  I need to know what I should do best to not be in the worst down fall.  What is the best suggestion you can give me?
 
Hopeless

                                                   __ ___ _ _ _ _____ _  __ _

Dear Hopeless,

Your situation is not good but it is not hopeless.

First, find out what the payoff figure is. This amount will be less than the total of all monthly installments, because the monthly payments include interest. It cannot hurt to know the exact amount owed.

This condition, Negative Equity (when you owe more than the car is worth) has no known happy solution, but some roads are worst than others.

In a worse case scenario, you do nothing. The creditor can take the car and pursue the balance from you through legal channels.

A better road is to determine (independently) the scrap value of the vehicle.  The insurance company will make an offer for present value - this can be negotiated.

Now you have two known quantities, the cash value of the wreck and the amount owed. The difference is now a matter of finance. Under these circumstances the lien holder may be open for negotiation to avoid the legal hassles. Perhaps a longer finance period with a low interest rate might get some attention against a threat of personal bankruptcy. Worth a bluff! 

Moving the debt to a credit card, an equity line or any other finance mechanism will be painful but at least the debt is structured, default is avoided, and you can sleep at night.

The real solution is living within your means. Get a part time job, work overtime, do what you must, but get out of this mess. If you learn a lesson from this experience, it comes at a price lower than many other misjudgments. If you don't learn, then, "Hopeless" will always be your middle name.

Learn your lesson,
Uncle Jim