cosigner on car loan

[alicia]

i may file bankruptcy. i am a cosigner on a car loan. the primary person on the loan, for who i am the cosigner, wants to keep the car and continue making the payments as per the original loan agreement. how will the ch 7 bk that i file affect this car loan? how will it affect the primary person's credit, if at all?

also, who is todd? i notice that todd answers many bk questions on this site.

[HRx]

i may file bankruptcy. i am a cosigner on a car loan. the primary person on the loan, for who i am the cosigner, wants to keep the car and continue making the payments as per the original loan agreement. how will the ch 7 bk that i file affect this car loan? how will it affect the primary person's credit, if at all?

also, who is todd? i notice that todd answers many bk questions on this site.

Hi, If you file BK it will be reflected on the person for whom you co-signed for credit report too. You should explain to the person that you are considering BK and explain how it will affect them. So they have the opportunity to refinance the loan using only thier name.

Good Luck!

[homerlaughln]

IF the payments are continuing to be made by the purchaser of the car, and I am the cosigner, and I file BK I don't see how it would affect the signers credit at all. How does that work? As long as the payments are made I would think the bank would just lose the cosigner's obligation to pay. How dey do dat?

[Amy26]

Because by being a cosigner on the loan you are both equally responsible for the debt. Its like buying something with your spouse... if one of you goes belly up it gets reported on the other because its "joint".

My best friend was in a reverse situation. She cosigned on a loan for a friend and then the friend decided he didn't want to pay for the car anymore. He skipped town and guess who got stuck with the loan? My best friend... she had to declare bankruptcy because she could not pay for this guy's loan.

I would definately get the purchaser to refi the car into their name only as HRx suggested.

[kenshirley]

I could be wrong, but I was told by another that if you are the co-signer the BK discharges your liability for the back up on that loan.

[Amy26]

No, you are correct ken. But it also affects the party that was joint on the loan as well. As long as the other party keeps up the payments though its probably fine... but I still wouldn't want to keep a joint loan knowing that the other person was about to file.

[IBroke]

but I still wouldn't want to keep a joint loan knowing that the other person was about to file.

That would only leave 2 options:

You would either have to pay it off on your own or do a refi on your own. In both cases, it would keep you - and only you - liable for the loan. In that case, the other signer couldn't even include that loan in his/her Bk because YOU paid off the loan.

Now if the co-signer includes it in his/her BK, you are also responsible for the loan. When it comes to liability, there is simply NO difference between a refi or just leaving it as it is.

There are many discussions about the right way to report on these accounts: Some claim it will show up on your report with a BK-notation - others say it mustn't because YOU didn't file BK so it mustn't be reported on YOUR report. Keep in mind that it would look odd if it would say that the account was included in BK but it still shows a balance and your monthly payments. Some say it would be reported as "co-signer discharged debt in BK" - but your chances are good that you can have that removed by the CRAs by arguing that the fact that somebody else filed for BK is something you can't control and has nothing to do with YOUR CR.

BTW, Experian shares that opinion:

http://www.experian.com/ask_max/max041509b.html

Experian is referring to a mortgage. However, I don't see a legal difference between that and a car-loan.

So as long as you stay current, there's nothing to worry about. Even if you would re-finance that loan, the negative impact on your report of opening this new account might be equal to the negative impact of a theoretical BK-comment on a single account.

[Amy26]

That would only apply if the OP was the one who was the main owner...which they are not. They said they co-signed on someone else's loan.

[IBroke]

That would only apply if the OP was the one who was the main owner...which they are not. They said they co-signed on someone else's loan.

So why sould this be relevant?

It doesn't matter who is "main" or "co".
A BK should only be reported on a CR if THAT individual really filed BK.

A "co" and "main" have the SAME responsibility under a loan-agreement after the other signer got his/her discharge...