23

My mom made me co-sign a car with her when I was young because her credit was bad and she really needed a car. She stopped paying for the car and now it has been charged off. I am worried about not being able to do things like get an apartment because of it - is there anything I can do?

mhoran_psprep
  • 139,546
  • 15
  • 193
  • 389
concerned-young-adult
  • 239
  • 1
  • 2
  • 3
  • 52
    Can you simply pay for the car? Which is what a co-signer is supposed to do. – jamesqf Jul 17 '21 at 16:42
  • 18
    What happened to the car? Did the bank repossess it? – TTT Jul 17 '21 at 18:24
  • 43
    How old were you when you co-signed? Did she force you to co-sign in any way? I wonder if the cosignership could be overturned by a court because of circumstances (I'm skeptical, but it might be worth researching)... – marcelm Jul 18 '21 at 12:46
  • 10
    What kind of lender would accept a co-signer young enough to be coerced by their parent (presumably with little or no credit history, maybe not even any income) on a loan? Sounds utterly sketchy, probably doing all sorts of illegal things. I think if you pursued this legally they'd be in deep shit, not necessarily because of the legality of the co-signing, but all the other stuff you'd turn up on them. – R.. GitHub STOP HELPING ICE Jul 18 '21 at 16:20
  • 14
    Though "young" is not precise. The OP might be in their 20s or even 30s, and still think of that as young. I've known a number of people who were still under their parents' thumbs at those ages. – jamesqf Jul 18 '21 at 16:27
  • 4
    How young were you when you co-signed? If you were not 18 yet, get a lawyer. – gnasher729 Jul 18 '21 at 21:13
  • 1
    In addition to how old are you (15 is different than 30)? If it was when you was 15, you're now 17... that's a vastly different problem than if it was when you was 27 and your now 28. also how much is owed on the car? has it been repossessed or are you on the title and able to sell it? – WernerCD Jul 19 '21 at 04:43
  • 1
    @jamesqf I know for sure about some sons under mom's thumbs forever. That's how moms are supposed to be, somewhere – usr-local-ΕΨΗΕΛΩΝ Jul 19 '21 at 08:24
  • 7
    It is actually likely that you are not a cosigner, but a co-owner. There has been a lot of data on this site and others that indicate the dealerships lie about the relationships. If your name is on the title, then you are a co-owner. – Pete B. Jul 19 '21 at 10:36
  • 4
    @gnasher729 I don't think a bank or dealer financing gig would let a 15 or 17 year-old dependent co-sign. This would be high-school age, so impossible that they could have any sort of income or credit score sufficient to guarantee a loan. OP must be an adult and must have had at least a few years of full-time working income, I would think. – J... Jul 19 '21 at 12:09
  • 1
    I could very easily see the situation being presented differently to a car dealer: here's my young child who needs a car, but we're here and ready to sign together. – spuck Jul 19 '21 at 14:29
  • 1
    Discussion of this question here: https://money.meta.stackexchange.com/questions/3014/edit-conflict-on-my-answer-locked-with-a-version-i-dont-want – DJClayworth Jul 19 '21 at 15:34
  • 6
    I don't think this question is answerable until the OP returns and responds to the many questions in the comments. We don't have the full story: how old is OP now, how old was OP when they cosigned, are they cosigner or co-owner, what were the circumstances under which their mom "made" them sign, etc. – shoover Jul 19 '21 at 21:04
  • What do you mean by "made me". What were the specific circumstances and what specific actions (verbal, body language, physical, etc.) did she take to "make" you? Were there implied threats or consequences? What benefits did or do you receive from her having a car -- did you get to use it, did or does she provide you with transportation, food, free rent if you are an adult, etc.? – Technophile Jul 19 '21 at 22:06
  • 1
    @spuck Yes, but if the mom has poor credit then bringing a young kid to co-sign who can't even sign a contract as an adult, let alone have any hope of repaying money, isn't going to happen. – J... Jul 20 '21 at 12:41
  • 1
    @J..., true, I guess "my young child" is a poor choice of words. The point I was trying to make is that car dealers are used to seeing a young-ish person with no credit show up with a parent to co-sign. I don't see it as impossible that the mother here had one story for the son and another for the dealer. – spuck Jul 20 '21 at 14:21
  • @spuck You're suggesting the mom did not actually have poor credit but co-signed with deliberate intent to defraud her own child. The only problem is that if the child was the one who needed the co-signer then she (the mom) would be the one ultimately responsible for making the payments, not OP. So... that can't really work. – J... Jul 20 '21 at 14:25
  • @J..., we're delving into chat territory here... :) No, I don't mean to imply that the mom did not have poor credit. They both could have had poor credit, but together it was "good enough". With a co-signer there's no "ultimately responsible", they are both jointly responsible. What I see as a possibility is a pushy mom with a story and a silent son at the dealership who signed where he was told. Or maybe mom even leaving and returning with the signed (forged?) contract. (Not as likely that the dealer would let the paperwork leave.) I don't see any follow-up from the OP, so we may never know. – spuck Jul 20 '21 at 14:36
  • @spuck Doesn't work that way, afaik. A co-signer needs very good credit (like 670+) and must be able to demonstrate that they can independently repay the loan if the primary defaults. The co-signer has ultimate responsibility. – J... Jul 20 '21 at 14:41
  • @J... Give one of those "Buy Here, Pay Here" car dealerships a call. Tell them you and your girlfriend have bad credit, but you've both gotten new jobs this month so you think together you should be able to make the payment. I guarantee they will tell you they can make it happen. – spuck Jul 21 '21 at 16:55

6 Answers6

85

Your Mom has really messed up your finances.

As cosigner you are liable for the whole of the debt on the car. And worse, you have no right to use the car or even stop your Mom using it. Your Mom used you to get a loan which her finances didn't entitle her to, and by failing to pay it doomed you to the same terrible financial circumstances which she got herself into. As an adult, presumably with a decade or two of experience of how finance works, she shouldn't have done that.

By the way, you should have been contacted by the loan company long before the debt was charged off. That would have been the time to take action. The fact that a loan has been charged off will already have had a negative effect on your credit.

Your first step should definitely be to contact the loan company and find out 1) if the car has been repossessed 2) how much debt is outstanding. Not talking to the loan company will only make things worse.

You have two options:

  1. Pay off the debt your mom owes, which you should be able to do by making the same payments your Mom was making. If, as Harper says, the car has already been repossessed then the debt will be less than the value of the car, and this may be achievable. It's definitely the best option, because the other one is...
  2. Fail to pay off the loan, and take the hit to your credit. This will prevent you getting any kind of credit for a long time, and may well affect things like your ability to get an apartment.

You can try a couple of things:

  • contact your Mom and try to persuade her to pay the outstanding debt (or some of it). If the car hasn't been repossessed maybe you can sell it and pay back some of the loan;
  • contact the loan company, explain the situation, and see if they will accept easier repayment terms, and possibly a lower total payment. Harper suggests you do this through a lawyer, and that may be a good idea despite the cost.

Also make a vow to never cosign a loan again.

DJClayworth
  • 33,328
  • 7
  • 87
  • 120
34

In addition to DJClayworth's excellent answer, there may be one other option - but it depends a lot on the details of how this co-signing happened as well as specific laws in your jurisdiction. You've mentioned that she "made you" sign the contract, but haven't provided any details on what that force consisted of. In many places, contracts made under duress are not legally enforceable. For example, if she was threatening to harm you. If so, it might be possible to no longer be responsible for the debt, and perhaps to clear it from your history.

However, you absolutely need to speak to a contract lawyer to explore this option - there's far too much legal complexity involved for randoms on the Internet to give a definitive answer on this.

Xono
  • 440
  • 3
  • 3
  • 20
    For example “you co-sign for the car or I’ll throw you out” could be duress. On the other hand, normally it would be the opposing party (the car dealer) putting you under duress, and the dealer can rightfully say they did nothing wrong. Therefore: A lawyer. – gnasher729 Jul 18 '21 at 21:27
  • 6
    If OP was a minor at the time they co-signed, then their signature would likely be voidable at their option (or, depending on the jurisdiction, it might be void ab initio). However, the lender would know this, and refuse to accept a minor's co-signature, so I doubt this is actually the case. – Kevin Jul 19 '21 at 01:00
  • 1
    Also, telling a court that you're not liable for the car because your mom forced you to sign it might cause a degree of strain in your relationship with her, especially if the bank then proceeds to repossess it... – nick012000 Jul 19 '21 at 14:35
  • 2
    @nick012000 From the mother's perspective, sure. I'd be willing to bet, however, that the OP is already feeling some strain on the relationship. – chepner Jul 19 '21 at 16:26
5

"Charge-off" means 90-180 days have passed since she stopped paying, and the creditor has decided payment in the near future is unlikely. It's a tax status for them. However, it does not erase the debt.

You need to pay for the car

You agreed to co-sign so you are responsible for paying for the car, unless you signed while not of legal age, or were coerced.

You knew that when you co-signed, and if that resulted in some temporary peace in the family, now is when you pay for that. You knew the score. So it's time to adult up.

I gather by the fact that the debt was "charged off" that the car has already been repossessed. Now it just comes down to money ($$$$). They will have sold off the automobile, reducing the debt somewhat, and you need to pay the remaining debt.

Contact a lawyer or your local legal aid. Have them negotiate with the company that you will pay an amount to settle the matter in full. A condition of the deal is that the debt will be completely and totally removed from your credit report, and neither of you will disparage the other in any way including credit reporting. Most creditors will agree to this if it means getting paid. Also I recommend adding a condition that you agree there is a genuine dispute as to the validity of the debt, and so, any amount they consider forgiven will not be treated as income. That will keep you from paying some taxes.

The lawyer can dot all the I's and cross all the T's.

Wait until both you and they have signed the contract before sending any money.

Then you write a fat check and you're free and clear.

If you don't pay

Then the creditor will hold onto the debt for awhile, on the off chance you do decide to start paying. After awhile, it will "sell off the debt" to another company. That company will make collection efforts against you. After awhile, they will sell your debt to another company. They too will make collection efforts against you. This could go on for 20 years, although after 3-6 years they will lose the right to sue you for the money.

Your best outcome will happen if you settle with the original creditor. Once they sell the debt, that becomes impossible, since they don't own the debt anymore. Therefore you lose the ability to haggle with them to stop reporting it to credit bureaus. It's on your credit report for good at that point.

By "for good" I mean for 7 years after the last payment.

Yes, it will suck to find an apartment during that time. Your best bet there will be "housemate share situations", which are a cramped lifestyle, but at least you are homed, in the locale you desire. If you are crafty, you can also consider Tiny House on friends' property, or buying cheap land and building a Tiny House... or even #VanLife.

Harper - Reinstate Monica
  • 58,229
  • 10
  • 91
  • 195
1

Unfortunately, "charge-off" doesn't mean that your obligation is gone. You could still hear from debt collectors for a long time if you don't address the issue now. You could contact the creditor and try to settle your debt.

It may be tempting to not pay a charge-off, since your lender has likely stopped trying to collect on the account. But as long as the debt is yours, you’re legally responsible for it until it’s …

  • Paid
  • Settled
  • Discharged in a bankruptcy filing

Plus, that charge-off can hurt your chances of getting a loan — some lenders may ask you to pay all outstanding debt before you can take out a mortgage or other type of loan.

https://www.creditkarma.com/advice/i/what-is-a-charge-off

Orange Coast- reinstate Monica
  • 7,990
  • 11
  • 22
-12

Well because others might look at this for help...

#1 - You should never co-sign, ever. But...

#2 - If you do co-sign then your name should be on the title (alone) and write a contract signing over the car in their name after all payments. That way if they miss payments, you then sell the car/whatever and deal with it as quick as possible.

#3 - If they do not agree to this, you are back to #1.

GS - Apologise to Monica
  • 29,974
  • 8
  • 93
  • 119
blankip
  • 4,675
  • 17
  • 27
  • 4
    @blankip - Unless you're personally involved in the OP's dilemma, I don't see where you have any justification for your now-deleted first point. It's also possible that the mother fully intended on making all the payments at the time of the signing, and then had a setback of some sort. It's admittedly somewhat less likely because she needed a co-signer in the first place, but it's still feasible. If you do have first-hand knowledge, then stating that in your answer would at least justify leaving that statement in. I still think it'd be in bad taste, but it'd at least be justified. – Bobson Jul 19 '21 at 18:01
  • 7
    I think there are two issues with your answer that can explain the downvotes for you, and it has nothing to do with the mod edit. First, your original point #1 is describing a person that you know nothing about. You have taken it a step further than DJClayworth to say that, not only did the mother do something wrong here, that she always does this as a pattern, which you don't know. You then go on to blame the OP, which I think many see as over the top. Second, your point #2 (originally #3) is probably not a smart idea. It is best to stick with "never co-sign." – Ben Miller Jul 19 '21 at 18:11
  • 1
    Third issue: this does absolutely nothing to attempt to solve OP's problem. It's as if the OP said "help, I'm pregnant" and the answer said "Well, you shouldn't have done the thing that made you get pregnant." - condescending and completely unhelpful. – user253751 Jul 21 '21 at 09:48
  • @BenMiller-RememberMonica - why is point number 3 a bad idea? If you are going to co-sign no matter what, that is what you do. The person you are cosigning for is royally screwed over if they do not meet the payments (possibly if you choose to). This either leads to them fulfilling the obligation or just saying no thank you from the beginning. Point #1 is a generalization of an adult needing a co-signer - they only need it because they fail to pay debts in the past. Probably many times. Your analysis is poor and weak. – blankip Jul 21 '21 at 17:36
  • @blankip I go into a little more detail in my answer to your meta question. – Ben Miller Jul 21 '21 at 18:36
-16

If the lender has not pursued you for collection, don't do anything. If they do, refuse to take their calls or respond to their letters, and watch your credit report. If anything appears on it, contact the credit reporting agency and dispute the mark. Tell them the debt is not legitimate and that it was taken out by another person in your name. Do not offer any more details than that on the nature of the illegitimacy. You do not want to be making statements they can try to prove are false. You only want to deny the legitimacy of the debt and leave the lender with the burden of trying to prove it's legitimate (which they will likely fail to do).

Do not have any contact with the lender whatsoever. Any contact you make with them will be used by them as evidence that the debt is legitimate.

R.. GitHub STOP HELPING ICE
  • 2,584
  • 16
  • 18
  • 11
    do you think that the claim that "the debt is illegitimate" is true? Or are you proposing that OP attempts to get away with lying about the debt? – Brondahl Jul 18 '21 at 17:04
  • 2
    I am proposing that debt is business not an ethical responsibility, and that OP act with the same degree of ethical behavior any lender would. OP did not voluntarily take on any debt, and is under no obligation to play along with that fiction invented by the lender and the person who used their name to get a car. – R.. GitHub STOP HELPING ICE Jul 18 '21 at 17:14
  • 17
    ‘My mom made me co-sign a car’ is the quote from the question. Sounds to me that OP signed, not that their name was used fraudulently or without their knowledge. If the debt really isn’t legitimate I agree with your answer, but it seems OP signed, it seems we need clarification from OP – quid Jul 18 '21 at 18:13
  • 1
    @quid: That does not matter. You are supposing some moral obligation to pay a predatory lender because of that, and I am not. I am advocating for OP to act in their own financial best interest. This site is full of too many people with an ideological view that debt is legitimate in and of itself, and who put that ideology before actually helping people solve their problems. Businesses that actually lend know that debt is business, and expect lots of it not to be paid. So helpt them get what they expected. – R.. GitHub STOP HELPING ICE Jul 18 '21 at 18:16
  • 7
    Are there possible legal repercussions for lying about the debt not being theirs when it legally is? – Kat Jul 18 '21 at 18:32
  • 3
    I do not advocate lying as part of this, rather being as terse as possible so as not to give the lender any information to use against you. – R.. GitHub STOP HELPING ICE Jul 18 '21 at 19:50
  • 2
    Yeah, don't do this. Trying to "fix" a broken credit rating isn't as easy as this answer makes out. – Dawood ibn Kareem Jul 18 '21 at 23:54
  • 23
    First you said "Tell them the debt is not legitimate", and then you said "I do not advocate lying as part of this". The first statement is a lie, nevertheless you advocated it. Are you a politician? – TonyK Jul 19 '21 at 00:07
  • Having read R..GitHubSTOPHELPINGICE's responses, I understand the mentality of wanting to fight a corrupt system. But such altruistic goals seem like they may be causing R..GitHubSTOPHELPINGICE to even be blind to the unethical nature of the dishonesty that R..GitHubSTOPHELPINGICE promotes, which would be bad itself even if there weren't possible threatening repercussions to false claims of fraud (when, for whatever reason, that signature did occur). There are just better ways to fight corruption than lowering your own integrity. Please value your own integrity! +1 @TonyK (humor, & spot-on) – TOOGAM Jul 19 '21 at 14:33
  • 1
    I think the distinction R..GitHubSTOPHELPINGICE is trying to make is that a legal obligation is not necessarily a moral obligation. It is likely the lender didn't explain what OP was agreeing to and possibly even minimized or outright lied about it, and obviously the mother coercing OP is not ethical. If the dealer repo-ed the car then they can probably make back whatever amount is still outstanding, especially with the way used car prices are nowadays. OP shouldn't be rendered homeless because they got talked into a bad decision. – Kat Jul 19 '21 at 18:44
  • 1
    However I'm not sure this tactic will be effective. I would start by responding to any collection attempts by telling them they need to prove the debt is legit, which is your legal right in the USA, and it doesn't require making any false statements. I think they will likely be able to prove it's a legal debt, though. – Kat Jul 19 '21 at 18:47
  • @Kat: Seriously, don't (respond). They know ppl who respond are much better marks, and responding may reset legal timers for them to pursue the debt. If you're not comfortable ignoring them, contact a lawyer. – R.. GitHub STOP HELPING ICE Jul 19 '21 at 19:49