I cosigned for a car that was repossessed

Maryland’s laws allow creditors to repossess vehicles when borrowers’ accounts become delinquent. The Maryland Department of Labor’s website notes creditors may also repossess a vehicle if a borrower violates other terms in an agreement.

If you cosigned for a borrower on a car loan, a creditor may hold you liable for missed payments. As noted by Bankrate.com, while you may need to pay the loan’s outstanding debt, you may not have the right to take possession of the vehicle. You may, however, work out an arrangement with the lender.

Who has liability for a repossession?

As described by Experian, creditors may collect unpaid balances from both borrowers and cosigners. Cars serve as collateral, and lenders may take them back when borrowers default. If the borrower you cosigned for failed to make payments and the lender took the car, you may incur liability for the costs of repossession.

As a cosigner, you may pay a deficiency balance. After repossessing cars, creditors auction them to make up for the loss from the loan default. If the car auctions for less than the balance owed, your lender may attempt to collect the deficiency from you. The amount may include fees related to repossessing and selling the vehicle.

What rights does a cosigner have during repossession?

Under Maryland’s consumer debt regulations and the contract’s terms, a lender must typically provide borrowers and cosigners with a Discretionary Notice no less than 10 days before repossessing a vehicle. The notice must arrive by certified or registered mail or through a personal delivery service.

After repossessing a vehicle, lenders generally have five days to send a Required Notice by certified mail. A lender typically provides a 15-day opportunity to reinstate the loan agreement after the date of repossession. Updating the account in time may avoid default and prevent damage to your credit.

Cosigner Rights if the Car Defaults

When someone becomes a cosigner, they sign the loan contract and share responsibility. If the primary borrowers fails to make payments, the lender can demand that the cosigner make them. If the primary borrower defaults on the loan, the repossession is also going to affect the cosigner’s credit score, because you share responsibility as a cosigner. But they also have the same rights as the primary borrower in the event of repossession.

• The option to redeem – The cosigner and the primary borrower have the option to redeem the car by paying off the vehicle in one lump sum before it’s sold.
• The option to reinstate – Not all states offer this, but either the cosigner or primary borrower can reinstate the loan by bringing the loan current with a single payment that covers all back payments due plus any additional fees.
• Auction date and time – The cosigner and primary borrower must be given notice of when and where the car is going to be sold at auction.
• Loan deficiency total – If the vehicle is sold and there’s a balance remaining, both the primary borrower and cosigner must receive a written statement with the balance due listed.

If a cosigner doesn’t receive these written notices as a cosigner, you should contact a lawyer and discuss any legal recourse you have.

When Can a Car be Repossessed?

In most states, the repossession process can begin as soon as you’re one day late with your car payment. Ultimately, when the vehicle can be repossessed depends on factors such as the state you live in, your lender, and your payment history. Once an auto loan is in default, the lender can repossess your car at any moment as long as they don’t breach the peace to seize the vehicle.

Most lenders don’t want to see you lose your car, and are willing to work with you to prevent repossession. The best thing you can do is contact your lender before you miss a payment and explain your situation. They may be able to work around your dilemma, but you aren’t going to know for sure unless you reach out to them.

Damaged Credit Due to a Repo?

Repossession can be prevented. Even as a cosigner, you’re responsible for making sure the loan doesn’t default. But if it’s too late and your credit score took a hit because of a repossession, you may think you can’t finance another vehicle. The good news is you can, and The Car Connection can help you get started toward auto financing.

We work with dealerships all across the country that are ready to help credit-challenged car buyers, including those with a repo. We want to connect you to a local dealer that can help you get back behind the wheel. Start today by filling out our simple

Can you remove yourself from a cosigned loan?

Can you remove yourself at anytime as a cosigned on a vehicle?