Legal Question in Credit and Debt Law in Massachusetts

Re: Auto loan

The signer and co-signor are equally liable to repay the note (or the outstanding balance on the loan, net of the value of the car when repossessed, assuming the car value is applied to the loan balance). In legal terms, both signor and co-signor are "jointly and severally" liable on the loan. Either one of which can be held responsible for paying the entire debt.

Usually the signor is primarily responsible for making the loan payments, and the lender will look to the co-signor only if the signor is not making payments. If neither one pays, the car gets repossessed, as has happened here.

However, the co-signor may have claims against the signor for contribution and/or indemnity, basically saying that "you, car signor, received the benefit of the car before repossession, and put me at risk of paying the outstabnding balance because of your failure to make the primary payments, as you promised to do." Therefore, "in the event I, as co-signor, am forced to pay your debts, you are liable to me -- to repay me for all or part of the amounts I had to pay on your loan."

The indemnity/contribution claims may be useless, however, if the signor has no money or assets to satisfy his/her liability to the co-signor. Usually, this is the case in situations like yours, where the car has been repossessed for failure to pay the loan.

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Re: Auto loan

The co-signer is also responsible for loan, and thus the payments under the loan. If folks do not want to make car payments on a car they do not have or operate, they should not be a cosigner.