First lesson: never co-sign anything. This person has completely failed financially, and since I co-signed, I’m afraid that if they declare bankruptcy, it will negatively impact my credit. How should I proceed? This automobile has a $15k debt.
They reportedly paid $15k for this 2018 automobile, and five years later, they still owing $15k. According to their loan claims, all they have been paying is interest throughout. Like, what the heck?
As the co-signer, how messed up am I if they declare bankruptcy? Alternatively, is this something that will help me get out of their horrible situation? LOL
In actuality, they are entirely released from the debt if they declare bankruptcy on a car you could have signed. And from this point on, YOU bear full responsibility for the loan. Legally speaking, you will be the only one accountable, and they will pursue you for the whole sum.
In order to maintain possession of items like your house and car and make payments, someone filing for bankruptcy might reaffirm them. For that and other possibilities, such transferring ownership to you right away and selling it, you and this person should consult with the attorney handling the case.
with your credit rapidly deteriorating. Are you deeply in debt elsewhere? In any case, filing for bankruptcy might be your best option as well. However, as I don’t know your income, state, assets, or costs, I advise you to treat my suggestion with caution.
This individual essentially has three options because the loan is secured.
Reaffirm the auto loan to somewhat shield it from bankruptcy. Apart from a few documents, obligations and payments carry on as usual.
redemption by the use of a new loan to pay off the old one. This is doubtful because individuals who file for bankruptcy find it difficult to obtain loans, and you are unlikely to cosign on another loan.
surrender of the car and debt cancellation. The car is no longer owned by this person. The car’s worth is deducted from the outstanding amount. The cosigner is now the only one responsible for any balance on the loan that exceeds the car’s worth.
I understand, OP; my now-ex and I co-signed a jeep. She’s missed so many payments that it has completely destroyed my credit score. Undoubtedly a choice I wish I hadn’t made.
To avoid losing the entire $15,000, you might try to work out an arrangement where you pay off the car in full and have it transferred into your name. From there, you can sell it and make as much money as possible.
If your funds aren’t that high, think about taking out a personal loan to cover the cost. After you pay it off and sell the automobile, take the proceeds right away and apply them to the loan balance.
Then consider this to be a lesson learned.
To save your credit, either take over the car and its payments or sell the vehicle and settle the outstanding amount. Finally, I believe you gained important knowledge: never give out your credit.