Legal Question in Business Law in California

Vehicle Loans

How can one remove themselves from a car loan? I allowed my good credit to be used by someone else so they could get a loan for a car. The car is in my name and she is making the payments. She refuses to get a loan in her name now because the payments will be much higher. The credit union tells me that I have only two choices, take the car back or take the chance that she will continue to make payments on time. I don't want the car but I don't want any connection with this person either. The car loan makes my debt load higher and I don't want this on my credit report. She is a poor credit risk and I can't trust she will continue making payments on time. I would like to know what my legal options are in this case. Another question: If she ''totals'' the car and the insurance company gives her the money, is she obligated to give it to me so I can pay off the loan? What do I have to do to make sure the insurance company pays off the loan or will they give it to me so I may pay off the loan?

Whatever advise you could give me would be appreciated. If I needed to talk to an attorny, what type of attorny would I talk to?

Thanks


Asked on 2/27/08, 11:48 pm

2 Answers from Attorneys
Edward Hoffman Law Offices of Edward A. Hoffman

Re: Vehicle Loans

I'm afraid you're probably stuck on the loan. That was the commitment you made when you co-signed. You, your friend and the lender have a contract and you can't just walk away from it. Neither of the other parties has to let you out of your bargain, and each has good reasons to insist that you keep up your end.

Your friend may be willing to let you buy your way out of it -- in other words, she may be willing to get a new loan in her own name if you will pay her money to help her make the higher payments. My sense is that you and she won't be able to agree on a price, but it's worth a shot. Even then, the lender may not let her refinance on her own and she may not be able to get a new loan elsewhere.

Another option you have is to buy out your friend's interest in the car. You talked about "taking" the car, but you have no right to do so. Since you were reluctant to get the car even when you thought you could get it at no cost, I presume you will be even more reluctant to pay for it.

As I said, you're probably stuck.

Turning to your last question: The lender almost certainly has a lien on the car and would be first in line to get the insurance proceeds if it is totaled. This means that the check would be made payable both to the lender and to your friend, so that your friend couldn't just take the money. If the loan balance is more than the car is worth then part of the debt will remain. Your friend will still be expected to pay it, and you will still be on the line if she doesn't.

Sorry I can't be more encouraging.

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Answered on 2/28/08, 12:13 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Vehicle Loans

The usual way to remove one's self from a loan is to pay it off.

However, it looks to me as though you are looking at the situation incorrectly. You own a car that you took out a loan to purchase. Then you lent the car to someone else. It's your car (according to the facts you gave) if your name is on the title. What you might wanna do is demand it back.

When you get it back, sell it and use the proceeds of sale to pay off the loan.

Further, if it's really in your name, she couldn't get a loan on it. Only the owner of property can put it up as collateral for a loan!

There is something a little mysterious about all the facts; they don't completely dovetail. Whoe does the insurance company think owns the car?

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Answered on 2/28/08, 12:38 am


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