I'm the cosigner on son's car; he's filing ch 7

[Stumperino]

My son is single with one dependent. He has $25K in cc debt and is way below median income. He wants to file BK ch 7. I have given him lots of financial help, including renting him a home at below market value and recently took out a loan for a car at my Credit Union for around $8,000. He is a co borrower on the loan, but I have been making the payments. The car is registered to both of us. We (I) have only made 3 payments on the car. Other than this his BK estate is negligible. Can anyone give me what the scenario will be with the car in bankruptcy? We obviously want to keep the car. Should I talk to the Credit Union about this? With my help he wants to file pro se, and we are just starting to educate ourselves.

[AngelinaCat]

Hi Dad, welcome to the Forum. How old is your son? You may have been making life far too easy for him, by 'helping him out', instead of letting him get educated in the School of Hard Knocks, and allowing him to 'grow up'. You might wish to review this thread about a 60+ year-old, that hasn't grown up yet either:

http://www.bkforum.com/showthread.php?72957-More-banks-may-offer-payday-loans

All that said, if the son files BK Ch7, and discharges his part of the car loan, YOU as co-signer will be held responsible.

That is the very simple, short answer.

How this actually plays out, depends on many different things: how is the car titled? Is it in his name, your name or both? If it is titled in both names, is it an 'AND' or an 'OR' title? Will the CU demand a Reaffirmation? Most do, if you want to remain in good standing with your CU. If you don't mind moving your banking business elsewhere, this can become a moot point.

Is this a brand new car with all the bells and whistles, or is it a good used car, reliable for getting from Point A to Point B and back again?

How is YOUR financial situation? Are you able to make payments on this car for five years--if a new car? If you do keep making the payments, are you going to have son pay you back, at least a little, now and again?

I am sure there are other questions I missed, but I am confident that the members will jump in with their opinions.

Good luck to you!

[AngelinaCatHub]

My son is single with one dependent. He has $25K in cc debt and is way below median income. He wants to file BK ch 7. I have given him lots of financial help, including renting him a home at below market value and recently took out a loan for a car at my Credit Union for around $8,000. He is a co borrower on the loan, but I have been making the payments. The car is registered to both of us. We (I) have only made 3 payments on the car. Other than this his BK estate is negligible. Can anyone give me what the scenario will be with the car in bankruptcy? We obviously want to keep the car. Should I talk to the Credit Union about this? With my help he wants to file pro se, and we are just starting to educate ourselves.

You have been too good to your son. As Cat said, he needs some growing up experience. Renting below the market will reflect on his bk, as well as YOU are paying for HIS car? In any event, nothing will happen to the car since you are cosigner and paying for it anyway, the car is secure. I'm sure you will just let him keep it. Since he is living off of you, why can he not at least pay the CC? 25K is not that much, considering he has it made with you. If he has no other assets the bk would go smooth but the Trustee will question the car and the low rent. Since you are a source of income (differential between market value of rent, and a free car), you will have to be listed as part of his income. 'Hub

[Stumperino]

Hmmm. How to explain. I don't exactly cherish the fact that whenever my son is up against it he comes hat in hand to me. However, I also don't want to see my grandson having to live in abject poverty. My son (who has full custody) is very good with him and his mother is useless in terms of any financial or sensible rearing contributions. They lived in a rodent and insect infested one bedroom home for five years prior to my acquiring the "investment property" that I am renting him. My son is regularly trying to find a better job, but he gets no offers. Unemployment here is at 20%. As far as Being a co signer, I saw that I would be listed on the forms, but the income listing is a new one on me. Of course the arrangement is whenever my son is capable, he must start paying reasonable rent, take over the car payment and hopefully one day start paying me back. If he were out from under the $500 per month cc payments, this could start to happen. For the last 7 years, whenever life's inevitable emergencies arise (car repairs, groceries and diapers, etc) he had to turn to credit cards. He once had a job paying $28K per year and was offered higher limits. When he was laid off, and could only land part time work, his income/outstanding credit ratio dropped, and the banks responded with higher rates and lower limits. Now he pays minimum payments and gets nowhere against the principal. Now he has to come to me when the emergencies arise. I am OK financially, getting a decent pension, but obviously life would be grander if my wife and I could have more of our income for ourselves. The only reason I took on the car was because he got in a wreck and totaled his paid for one and he depends on the vehicle for his job. I thought it made sense to get a reliable one and not a beater. That didn't exactly work out, but that's another story. It is a 7 year old car and we probably have $100 equity at this point and it is worth maybe $7500. The car's title is me OR him. Right now hours are being cut at his job and he struggles to pay utilities, insurance and fuel expenses. Now I am wondering the ramifications of my assistance on the BK.

[AngelinaCatHub]

OK, Dad. I entirely understand. I'm a Dad too. Our economy is not too swift. Seems Hope and Change did not go too well. If you were to change the Title to your own name, that would help in bk, but not for insurance reasons. Most insurance companies only insure the Titled owner.

Face it that you are now involved. Has he filed yet? If he is paying $500 a month for his credit cards, here is what I would do: Give him the car payment, give him appropriate rent in your area, IF you can afford it, take up the CC payment. IF he does well, you will be stuck with the CC payments (IF YOU CAN PULL THAT OFF) but if he then goes badly, no amount of bankruptcy will fix him.

This is just a thought from one Dad to another. If he fails under the no CC debt, then give it all back to him. Let him bk, and "HE'S ON HIS OWN". It's called tough love, Dad.

Giving a helping hand is one thing. That is a hand up. However, just giving him relief, makes it a hand out. Hand outs become expected and abused.

We currently live in tough times. The helping hand he needs is at the end of his arm. I've done this, and been here. 'Hub

[Stumperino]

Not a bad suggestion, Cat's Hub, but boy does it irks me to pay those unscrupulous cc creditors. It burns me up that they raised rates to over 20% on somebody that is struggling. And I tell you I would never pay over 12% on any loan. My son's been hacking on that debt for over 7 years now and it doesn't seem to diminish. Having him free of those payments would allow me to raise the rent $150 and hand over the $170 car payment to him and I would have some of my disposable income back! That would be a better scenario for me. And yes, the reason he's on title and loan is his taking care of his own insurance.

[df04527]

I can only say I just went through almost the identical situation with a daughter. I was the primary on the car loan - she was co-signer. She continued to pay for the car - there is and was no problem when she filed BK7. There is nothing on my credit report at all because I did not file.

Have him file - keep paying for the car and you will be fine.

[Exployer1234]

Has he talked with any of the CC's company on what they would take if he paid the amount in full? Some credit card companies will take just the principle owed, but normally he has to be more than 3 months behind. I had some credit cards that I had not made a payment in over a year and the credit card companies cut the balanced owed in half, and they tried to work out a payment arrangement that was about 50 dollars a month instead of the 200 dollar a month on each card.

Also has your son looked into going back to school to make him more marketable? Schools do offer grants and scholarships that would not have to be paid back. Basically free education.

I know it is hard not to bail him out, but I agree that if you can swing the CC payments maybe he can get back on his feet. If that does not work then cut the ties and he BK's and starts over. I would check out the local colleges though and see what is out there. Also has he looked into some state assistance? They have tons of programs for single parents that could help out with food and necessities and that would cut the cost on what you are having to pay.