Car loan. Not sure how to hand this one!!

[Michael266]

I have met with a lawyer already, but I haven't filed yet, that's not the issue.

The concern is that I have an auto loan with a co-signer (insurance reasons) that was a used car when I bought it a little over a year ago. Just recently the truck motor got a crack in it either in the head or something deeper and has rendered the vehicle useless basically.
I can't afford to pay this out of pocket otherwise it wouldn't be an issue.
Since I haven't filed yet, what will happen when I do file:
1.) I really don't care if the bank repossesses the car at this point, but I have the concern with the other person on the loan. I just need to save money to even pay the lawyer and that's been a struggle.
2.) What will happen if they do repossess and see that the vehicle is in non-working order?

[debee]

Hi Michael,

Welcome to the forum.

This is what I think will happen: the lender will repo the car and sell it. The difference between what they can get for it and what you & the cosigner owe on it is the 'deficiency' amount. They will not come after you for the deficiency nor will they be able to (presuming you file bk7 and your debts are discharged), but they will go after your cosigner.

Sorry to be the bearer of bad news.

[Michael266]

Ok. I did forget to mention I believe that I am still paying on the loan for the protection of the cosigners credit, so the auto loan isn't in any bad standing. And that I am the primary on the loan (not sure if it matters), meaning I make the decisions on the loan.

[debee]

Ok. I did forget to mention I believe that I am still paying on the loan for the protection of the cosigners credit, so the auto loan isn't in any bad standing. And that I am the primary on the loan (not sure if it matters), meaning I make the decisions on the loan.

These facts don't change the lender's rights. They will still be able to pursue the cosigner for the deficiency.

Depending on how much time you have and your current income, you may be able to figure out some way to get the cosigner off the loan before filing, or perhaps discuss the issue with them and see if you can pay them back after you file.

[despritfreya]

Adding to debee's comments. . .

If you allow a repo the repo will show up on the co-signer's cr (as well as yours).

Thought. . .

You indicate that the loan is in good standing. If you intend to continue to pay then file the bk, do not reaffirm but keep making payments. It is unlikely that the lender will repo if payments are current (especially when you tell them the condition of the vehicle). Pay off the vehicle, obtain a lien release, and then dispose of it. If the account stays in good standing there should be no real impact as to the co-signer. This is an expensive way to handle the situation but it should protect the co-signer from collection efforts.

Des.