Legal Question in Credit and Debt Law in California

CoCreditor

I was in the military when I cosigned on a vehicle loan. While on a tour away from where the vehicle was purchased, my friend got into a financial hardship and file for bankruptcy and the vehicle was turned in to the creditors. Now his bankruptcy filing has clear him of all responsibilities of paying the loan. Am I legally bound to pay off all the debt and he's set free?


Asked on 11/02/07, 10:47 am

2 Answers from Attorneys
Robert F. Cohen Law Office of Robert F. Cohen

Re: CoCreditor

Unfortunately, when one co-signs for another, one assumes the same financial burden as the other. You will be responsible for the deficiency on the vehicle -- that is, the value of the remaining loan minus its resale price. You might speak with the lender and explain that you were away serving the country while this happened, so you couldn't keep tabs on your friend. Ask if they will either reduce the amount owed and allow a payment plan, or forgive it entirely.

Read more
Answered on 11/02/07, 11:20 am
Carl Starrett Law Offices of Carl H. Starrett II

Re: CoCreditor

The advice Mr. Cohen provide is correct. The only thing I would add would to be wary of the potential tax consequences of debt forgiveness. A lender forgiving $600 or more in debt is technically required to report it as 1099 income. Consult a tax specialist to determine what impact, if any, the potential forgiveness might have on your taxes before entering into any agreements that involve the lender giving up any potential claims against you.

Read more
Answered on 11/02/07, 11:37 am


Related Questions & Answers

More Credit, Debt and Collections Law questions and answers in California