Having someone cosign for a car loan is sometimes the only way people can get one. One example is a young driver having a family member cosign because they have not yet built sufficient credit history to get a loan on their own.
Things can happen, however, that make keeping up with payments impossible. Filing for bankruptcy is sometimes the best solution in such a situation. However, it is important to understand how this will affect the person who cosigned for the loan.
The lender might still hold them responsible
Cosigning means that the person guarantees they will pay if the primary debtor doesn’t. This is what the lender may expect them to do. If someone has a Chapter 7 bankruptcy filing, the court may excuse them from liability for the car loan, but that does not mean it will excuse the cosigner.
If this is the case for you, what are your options?
You will need to tell the cosigner of your predicament, but you do have options. If you wish to keep the car, you can try to reaffirm the loan. This requires an agreement with the lender that you will continue paying once the bankruptcy goes through.
Remember, it may be feasible to make these payments if the bankruptcy relieves you of other debts. This said, you need to be certain you can pay, as a failure to could affect both your and the cosigners’ credit score.
If the loan is mostly paid off and you are current on repayments, it is possible you could seek to keep the vehicle under Florida’s bankruptcy exemption allowances, although you may still need to pay off the remainder of the loan.
Another option is to redeem the loan. This means making a one-off payment on the outstanding amount in order to keep the vehicle, which might be difficult at this time.
A third option is to let the lender take the vehicle back. That will leave you free of the debt, but without a vehicle. The lender may still pursue your cosigner for any outstanding debt, though, as the bankruptcy applies to you only.
As you can see, it’s complex. Seeking legal guidance can help you understand the reality of your situation and find the most suitable solution.
