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Ask Attorney T. Lodge Your Own Question
Attorney T. Lodge
Attorney T. Lodge, Attorney
Category: Bankruptcy Law
Satisfied Customers: 45
Experience:  10+ Years Experience Chapter 7 and Chapter 13 Attorney
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I cosigned a car loan at a credit union for my son and daughter

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I cosigned a car loan at a credit union for my son and daughter in-law a little over a year ago. The loan is now at $13,000.00. They are about to fianalize their small bussiness and personal bankruptcy. How will I be held to this loan and will it ruin my good credit? I am retired and on a fixed income and have been unable to eat or sleep. Can you help me?
If they file a regular Chapter 7 case, then you will not receive any protection from the bankruptcy courts as a consequence of their filing bankruptcy. In this instance, the credit union is free to come after you as a co-signer on the note. It will most likely have a negative impact on your credit rating due to your son and daughter-in-law's default on the note.

Since a car loan is a secured debt, the credit union has the right to either get their payments -or- seek to have the car repossessed and returned to them. They will probably retain local bankruptcy counsel to help them do this while your son and daughter-in-law are in an active bankruptcy filing.

If they file a Chapter 13 case for some reason, normally there is a special co-signer protection which may preclude the credit union from coming after you during the term of the bankruptcy proceeding itself.

If they are not going to be making the payments (and assuming you don't want to take the payments over yourself [along with ownership of the car!], the best thing to do might be to sell the car and pay off the loan -- or alternatively, voluntarily give the vehicle back to the credit union and work out some sort of agreement with respect to any balance due.

Finally, depending on what state you are, your fixed income (assuming its something like social security or a pension) MAY be considered exempt meaning that the credit union may not be able to touch it.

Good Luck.
Customer: replied 8 years ago.

How long an impact might there be on my credit?


Thank you for your help. I'm not sure I'll sleep any better but at least I know what I may be facing.

Last I checked a negative item can be reported to the 3 major credit bureaus for a period of seven (7) years.

That's what I suggest dealing directly with the credit union to come to a resolution short of a formal repossession, lawsuit and judgment.

All that being said, please remember that good credit / bad credit is a subjective thing. It means different things to different people. While it is always good to have excellent credit, you may be at a stage in your life where you don't need to purchase a new home, or a new car, etc., as opposed to someone younger. So, worst case scenario, you might not be too bad off from a credit perspective.

Good Luck.

Good Luck.

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