When a cosigner does not pay a debt, the bottom line is that the creditor will now be coming after you.
The story usually goes something like this. Daughter’s car broke down on Walnut Avenue coming home from grocery store. The engine fell out and now she is desperate for transportation. Her old car had to be junked. Now, she can’t get back and forth to her job at the mall in Dalton without a car. Then, she finds this really nice car dealer who will sell her the car of her dreams but…………she needs a cosigner.
Mom does not want to cosign the loan but daughter begs. Mom has great credit and knows that her daughter has trouble holding down a job. Mom has also heard stories at work from people who got into financial trouble because they cosigned a loan with a friend or family member.
As a mother will almost always do (even though I advise them against it) they consign the loan for their child’s dream car. You already know where this story is going.
Daughter gets into a fight with her boss at the mall in Dalton and gets fired. Now, she can’t make any of the car payments. As a consequence, the car gets repossessed. Pursuant to Georgia law, the car is then sold at a public auction for a fraction of what it is really worth.
Now, the dealer files a lawsuit in Whitfield County Superior Court to collect on the remaining balance of $15,000.00.
What are the options for dealing with this cosigned nightmare debt?
Option #1: Mom makes arrangements with creditor to pay the debt in full.
Option #2: Both Mom and daughter can file separate Chapter 7 bankruptcy cases to eliminate the debt. If only the daughter files for Chapter 7 bankruptcy, the creditor will still be able to go after the mother.
Option #3: If either the daughter or mother files for Chapter 13 bankruptcy, the debt can paid in the Chapter 13 plan. As long as the debt is paid at 100 cents on the dollar along with applicable contract interest in the bankruptcy plan, the nonfiling cosigner will be protected from lawsuits and harassment.
It never hurts to explore your options. If you are dealing with a cosigned debt problem, call me today and lets see if we find a solution that will work for you.