If the cosigner for my auto loan files for bankruptcy (13 or 7)....

[Worried27]

What are my options here. I have never missed a payment or been late. The loan is in negative equity due to the interest rate (upper 16's) and we pay the $700 a month religiously. But the cosigner is about to file for bankruptcy. We would either like the car to not be included or maybe have the debt cleared and we could make part of the cosigners BK payments?



Please help.

~Worried

[krielly]

If I understand you correctly, your co-signer is filing, but you have the vehicle?

If you have the vehicle, and are making the payments on time, there is no reason this should affect you. The only thing you may want to do is to monitor your credit reports to assure that the BK is not mentioned anywhere on them. If it is, dispute, dispute, dispute!

If there is negative equity in the vehicle, then there would be no reason that the trustee would want it anyhow. As long as the payments are current, and continue to be, you should not have any problems.

Good luck
K

PS: Not everyone has to file BK due to "poor decisions". Don't be surprised if you hear some feedback on this Just letting ya know......

[Worried27]

I have taken your advice and removed it! :-)


And yes, we are in possession of the the vehicle and we make the payments. And the cosigner is filing.

Is there a way for us to resolve the neg. equity by having it included in the BK? Because it is also a drain on our resources. We know we made a poor choice to begin with. We now owe 19k on a 14k vehicle. And the sad part is we haven't missed or been late on the payments and can't refi until the neg equity is closer to around 2-3k.

So is there a benefit, if it was included in the BK? Will that make the interest stop accruing? Would it possible lower our payment?

[krielly]

Not that I know of. Unfortunately, if your co-signer files, and their financial obligation is discharged in the BK, you are liable for it. The only remedy you would have is to file yourself. Not worth it I'm sure solely for the amount of money you are talking............

[Worried27]

Ya, there is no need for us to file. We are only in debt for the auto loan. Just don't want our credit to be whacked.

So the cosigner would have to leave the auto out of the BK and then we would continue paying the bank as we have been. And we should monitor our credit reports to make sure its not being affected?

[krielly]

Your co-signer must list the vehicle in his bankruptcy. He cannot omit any debt he is responsible for. You will probably be notifed when he files, as you are a cosigner, and therefore an interested party. (Not sure of that, but I believe you will be).

Any debt that someone is responsible for must be listed. Don't worry, that does NOT mean that you will lose the vehicle. The bank does NOT want a vehicle back which is 5K upside down. If you continue to make the payments, they will not try to reposess.