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The situation is my best friend applied for a joint car loan while she was married to her ex husband, then they had a very ugly divorce and in the divorce paper he took ownership of the car and he has been paying for it with money he is getting from my friend since he does not have a job or money. Now he is threatening to file bankruptcy and she is afraid that the car loan will be her problem and her credit will be ruined because she has to pay off the car or the loan will be reported as in bankruptcy on her credit report. What can she do to protect her credit and money? I believe the players are loan debtors, ex husband (non cooperative) and credit report agencies
Response: The only way to protect her credit is to find money to pay off the car. Otherwise, once the ex husband files for bankruptcy protection , the car would be reported as in bankruptcy on her credit report. Also, if the ex husband is filing under Chapter 7, your friend would be solely responsible for the payment on the car if the ex-husband bankruptcy is successful--that is, if he gets a Bankruptcy Discharge.
However, since this a property settlement, she can sue her ex-husband to force him to pay her back the money that she paid on the car. Marital Property Settlement Agreements are not dischargeable in Chapter 7 bankruptcy and only dischargeable in Chapter 13 case after completion of the Chapter 13 plan. See 11 U.S.C. Section 523(a)(15)
I am sorry that I do not have better news.