My Granddaughter asked me to guarantee a loan for her and her husband to get a car. Her husband was borrowing money to buy a car, and his credit has not been good, so to get the loan he needed someone to guarantee it. He had a good job and he kept telling me that he just needed to clear up a few things and that was the problem with his credit. Well I signed, he got the car, and upon review it now appears that I am the principal signer of the loan, not a guarantee. Now my Granddaughter has separated from her Husband. He lost his job, and has not made a payment. I took the car and made him turn it in to the dealer, however I’m out about $15,000 because they would not give us the full value of the car (yes it was new and now it’s a year later so it’s not) and apparently they also rolled an old loan over into this loan. What are my rights? How do I now get the money back from this soon to be ex-grandson-in-law.
When you agree to sign for the loan then you became obligated to the bank for the full amount of the loan, regardless if you had any use of the car. It also sounds like your Grandson also signed for the loan, so he was also liable to the bank.
This means that you are obligated for the debt, just as your Grandson is, his failure to make the payments is affecting your credit, as it is affecting his. However, he apparently already has bad credit, so even though he has a ‘good job’ he must not know how to handle money, or he has other issues that take over his ability to pay timely. (Drugs, alcohol, gambling). There is a reason why you needed to look very closely prior to signing the papers, because once it’s done, you are obligated to the bank.
Now what happens if neither of you pay? The vehicle will be repossessed. And as I have stated in other articles, once a vehicle is repossessed it is sold at auction, and generally for little or nothing. But your grandson, and you, are still on the hook for the loan, including the cost of the repossession and the auction fees, collection fees, filing fees, attorney fees, and everything else. This loan will turn into a judgment against both of you.
If you take it upon yourself to pay the loan, once it is paid you may then sue your grandson to reimburse you for your lost funds. You will then be in line with any other judgments and debt collectors, and also face the possibility of him filing bankruptcy and you never getting paid. Since he has apparently lost his job, if he owns no real property, does not have a job, and is not being responsible to you, he is basically ‘judgment proof’. What that means is that you can get a judgment against him, but you may never see the money. Judgments are good for 20 years, but collecting is another matter. This is always the problem with a judgment. You become a collection agency, which means that you have to keep track of where he lives, where he works, where he banks. Because that’s the only way that you will ever be able to collect.
Before you ever co-sign a loan or guarantee a loan know everything you can about the person you are helping (even if it is family). You need to see their credit report and pay stubs. You need to have their social security number, and all bank account information. It’s never easy saying ‘no’ but sometimes it’s the smartest thing to do.
As always this is a general answer, to a general question. You should always consult your attorney about the specific issues that surround your specific needs.
If you have a question for Attorney Kukuvka, please forward it to: Cynthia M. Kukuvka, Attorney at Law, 330 E. Main St., Palmyra, NY 14522 or e-mail to cklaw@verizon.net.