Cosigned car loan

[Kennyp217]

I live in Alabama. I'm planning on filing chapter 13 soon. I have a cosigned car loan with my wife I don't want tied up in my bankruptcy. Will she be able to keep the car as long as she makes the payments? The car is titled to both of us. I signed primary and she signed secondary due to her previous chapter 7.

 

[adjusterjack]

You're going to have to read your loan contract and determine whether a borrower's bankruptcy is an event of default that would allow for repossession.

Come back and quote the section word for word after you've read it.

 

[Kennyp217]

Re

I read the contract and there's no mention of bankruptcy in the default section of the contract. It states you must pay this contract even if someone else has also signed it. Also states we may release and come buyer or grantor and you will still be obligated to pay this contract.

 

[Kennyp217]

Re

That was supposed to say co-buyer or grantor not come buyer. I hate auto correct lol

 

[adjusterjack]

I read the contract and there's no mention of bankruptcy in the default section of the contract. It states you must pay this contract even if someone else has also signed it. Also states we may release and come buyer or grantor and you will still be obligated to pay this contract.

Obviously, I can't guarantee anything but, if that's the case, when you discharge your obligation as a co-signer (and/or co-owner) the lender is likely to be happy continuing to get the payments on time from your wife and won't repo the car.

 

[despritfreya]

I live in Alabama. I'm planning on filing chapter 13 soon. I have a cosigned car loan with my wife I don't want tied up in my bankruptcy. Will she be able to keep the car as long as she makes the payments? The car is titled to both of us. I signed primary and she signed secondary due to her previous chapter 7.

The correct answer to this depends upon how cosigned secured debt is treated in your jurisdiction in a Chapter 13 Plan.

You will have to list the asset on Schedule B.

You will have to list the debt on Schedule D.

Since the vehicle was purchased/financed after your wife obtained her Chapter 7 discharge she is listed as the co-maker on Schedule H.

The Chapter 13 Plan will state, someplace, that the creditor will be paid outside the Plan by the co-maker. It is this part that varies by jurisdiction.

Discuss this with a local attorney.

Des.

 

[Kennyp217]

Re

Thank you for your help!

 

[latigo]

The correct answer to this depends upon how cosigned secured debt is treated in your jurisdiction in a Chapter 13 Plan.

You will have to list the asset on Schedule B.

You will have to list the debt on Schedule D.

Since the vehicle was purchased/financed after your wife obtained her Chapter 7 discharge she is listed as the co-maker on Schedule H.

The Chapter 13 Plan will state, someplace, that the creditor will be paid outside the Plan by the co-maker. It is this part that varies by jurisdiction.

Discuss this with a local attorney.

Des.

Okay so the Plan is approved noting that the creditor receives nothing from it because the loan is to be repaid by the co-maker. But what happens if the co-maker defaults and the loan is so up-side-down that the creditor cannot come close to recouping its loss by repossession and sale?

Is its only recourse to purse a deficiency judgment or can it petition for some relief in re a revision of the Plan?

Also would the creditor have to approve the arrangement? And if the wife were to default, what if any consequence would result from the increase in the family spendable income?

Not trying to nitpick or sharp shoot you, but this sounds a bit complicated and based upon an unpredictable in leaving the creditor to the mercy and good faith of the co-maker and the soundness of the marriage.

With much respect, Lat

 

[despritfreya]

Okay so the Plan is approved noting that the creditor receives nothing from it because the loan is to be repaid by the co-maker. But what happens if the co-maker defaults and the loan is so up-side-down that the creditor cannot come close to recouping its loss by repossession and sale?

Is its only recourse to purse a deficiency judgment or can it petition for some relief in re a revision of the Plan?

Also would the creditor have to approve the arrangement? And if the wife were to default, what if any consequence would result from the increase in the family spendable income?

Not trying to nitpick or sharp shoot you, but this sounds a bit complicated and based upon an unpredictable in leaving the creditor to the mercy and good faith of the co-maker and the soundness of the marriage.

With much respect, Lat

You are not nit picking as these things do happen.

If lender fails to get payments outside the Plan it will file a Motion for Relief From Stay. The Motion will cover the debtor under Section 362 and the co-debtor under Section 1301.

Once the stay is lifted it will repo the vehicle, sell it and then, if it so chooses, amend its secured claim to a general unsecured claim.

Once it amends its claim it will share in whatever distribution there is to the general unsecured creditors.

As it relates to the co-debtor, the co-debtor is not in bankruptcy and, since the Plan did not provide for full payment of the claim (again - Section 1301) is not protected. The co-debtor can be sued for the deficiency. The co-debtor will be given credit for any money recovered under the Chapter 13 Plan.

Hope that answers your inquiry.

Des.

 

[latigo]

You are not nit picking as these things do happen.

If lender fails to get payments outside the Plan it will file a Motion for Relief From Stay. The Motion will cover the debtor under Section 362 and the co-debtor under Section 1301.

Once the stay is lifted it will repo the vehicle, sell it and then, if it so chooses, amend its secured claim to a general unsecured claim.

Once it amends its claim it will share in whatever distribution there is to the general unsecured creditors.

As it relates to the co-debtor, the co-debtor is not in bankruptcy and, since the Plan did not provide for full payment of the claim (again - Section 1301) is not protected. The co-debtor can be sued for the deficiency. The co-debtor will be given credit for any money recovered under the Chapter 13 Plan.

Hope that answers your inquiry.

Des.

Thank you Des for the reply and courtliness.