Cosigned a loan then divorced

[JustaFriend]

So here is the story, one of my friends co-signed a loan back in march for a motorcycle with her then hubby. In the last month they have gotten a divorce and in the divorce it was written in that he would take over the payments for the motorcycle/ refinance it in his name. Her divorce lawyer said that it wouldn't be a problem if he moved. Now since then he has moved across the country with the motorcycle and decided to stop making payments, and the lawyer says the only thing he can really do is file a contempt of court. Is this the only thing that can be done?

 

I have read a few things online and a most say that my friend is going to be stuck making payments on the bike until it is paid off, unless she wants to trash her credit (not a smart move as we all know). My question is that most of these other discussions i found online had to do with loans that were used to pay for intangible things such as school loans, what can she do since the money was used to buy something like the motorcycle that actually exists? Is there anything she can do since she will be the only one making payments on the bike or what other possible solutions can you offer?

[MarvBear]

Since this is a credit related question would the original poster wish this moved to the main credit forum?

[JustaFriend]

Yes please, sorry if i posted it in the wrong section.

[Chris in OK]

Not that it was posted in the wrong section, it is just more likely to get the answer you're looking for being as its a general credit type question.

 

Moved to the main credit forum for more views/responses.

[collins135]

So here is the story, one of my friends co-signed a loan back in march for a motorcycle with her then hubby. In the last month they have gotten a divorce and in the divorce it was written in that he would take over the payments for the motorcycle/ refinance it in his name. Her divorce lawyer said that it wouldn't be a problem if he moved. Now since then he has moved across the country with the motorcycle and decided to stop making payments, and the lawyer says the only thing he can really do is file a contempt of court. Is this the only thing that can be done?

 

I have read a few things online and a most say that my friend is going to be stuck making payments on the bike until it is paid off, unless she wants to trash her credit (not a smart move as we all know). My question is that most of these other discussions i found online had to do with loans that were used to pay for intangible things such as school loans, what can she do since the money was used to buy something like the motorcycle that actually exists? Is there anything she can do since she will be the only one making payments on the bike or what other possible solutions can you offer?

 

Unfortunately for your friend, creditors don't give a whit what is in a divorce decree. They are not bound by the decree only the husband is.

 

So you can do a few things in this situation, and only your friend can choose which is best.

 

1) you can hold the spouse in contempt of court and make them follow the decree.

2) you can pay the debt yourself, and then sue the spouse for the amount of the debt

3) you can pay the debt yourself and count the money as lost but keep your good credit and possibly repo the bike

4) you can do nothing, let your credit be trashed and give any and all ca's spouse's info.

5) refi the bike in husbands name only

6) refi bike in wifes name only and then repo the bike or possibly report the bike as stolen (just be careful before you do this and take into consideration the legal aspect)

 

other than that. i do not know of any way to settle the matter.

[drkaje]

Sorry to read of your friend's misfortune.

 

Only thing she really can do is contact the company or take the toy back and sell it. Going to court would get expensive. Finance companies probably only care about getting their money but maybe after a few calls she could find someone helpful. She, herself, may be able to repossess it.

[collins135]

Given the current state of credit and economy, I doubt very seriously that you would find many people wanting to buy a used bike at the price of the loan.

 

That could leave her with a remaining balance that would have to be paid back, and then you would have to deal with the finance company because they have an interest in the bike. That may not be a viable option and could be just as expensive and problematic as going to court.

 

Refiing the bike could be a good thing if done right and with a good company. I just refied a car in my DH's name, i did it myself filled out the paperwork online and everything got him a lower rate which made a lower payment and had no fees tacked on to the loan.

 

The repo of a bike is similar to the repo of a car. I have gone through it with my brother and know i am helping him untangle that mess.

 

If she all ready has a lawyer, i can bet she all ready knows how expensive it can be and if she can afford it. But one way or another it has to be paid.

[drkaje]

Personally... I'd call the finance company and try to work out a deal where they took the bike back but didn't mess up my credit. I'd just pay the difference and let it be done or have them go after the ex. It would just come down to catching the right person on the phone. If the bike wasn't in my possession how's a dude to know if it's properly insured, registered, etc.. to stay in compliance with the financial agreement?

 

It's doubtful a divorce decree releases someone from a contract.

 

If all else failed.. one down, five up!!

[collins135]

Personally... I'd call the finance company and try to work out a deal where they took the bike back but didn't mess up my credit. I'd just pay the difference and let it be done or have them go after the ex. It would just come down to catching the right person on the phone. If the bike wasn't in my possession how's a dude to know if it's properly insured, registered, etc.. to stay in compliance with the financial agreement?

 

It's doubtful a divorce decree releases someone from a contract.

 

If all else failed.. one down, five up!!

 

I know of no instance when a voluntary repo does NOT hurt your credit. There is no way to just cancel out a contract other than paying it.

And no, a divorce decree DOES not release anyone from a contract.

 

You have to look at it from both parties prospective, if they just took the bike back, it is now considered "used" which is now worth less than a new bike and the company can not sell it as new and can not be reassured what condition the bike is in to take it back and cancel out the contract. Sorry but that is just bad advice and I do not know of ANY comapny that would do that, without making you responsible for the financial loss and thus showing it on your credit.

 

The bike was cosigned, which meant she agreed to pay if he couldnt. Now that he cant'/wont pay the onus is no on her to complete the contract. The onus is also on her now to make sure it is licensed and registerd and complies with all laws.

 

The act of divorcing does not release any one of the financial responsibility. So now the responsibility is on the friend to chose which action she would like to take.

 

Like I said, companies do not care about a divorce decree because it in no way is binding on the company, you will get no sympathy from them.

 

You have to decide what is more important, your finances or the whims of a spouse.

personaly, i would pick my finances and throw the ex to the wolves.

[NoMoreFEMA]

When I was divorced, my ex-and I had an agreement that a Ford 500 that was financed by her (I co-signed) would become my property. If I defaulted on the loan or could not provide insurance, I had to give it back to her.

 

After the initial hearing, I sent a letter to FMC and advised them of the arrangement. I got no answer. Six months or so later, I decided I did not want the vehicle anymore but was upside down by 12K. I drove the car to her house and parked it. She signed handwritten paperwork showing I voluntarily surrendered the vehicle, the mileage, damage, etc. I filled out the proper State of Texas transfer forms and mailed copies to her, her attorney, my attorney and FMC.

 

In the FMC packet I also included my original letter to FMC and another letter saying basically I was not responsible for the vehicle because of the court order, and not to seek reimbursement from me if the ex defaulted. They sent me a letter back saying that legally I was just as responsible for the vehicle as her, but that if she defaulted, the worst thing that could happen is a negative on my credit report. They felt that because of the divorce, it was shaky ground in trying to collect from me through the court system if the ex defaulted.

 

Luckily, she traded the vehicle in for a new SUV. But now it’s my fault that gas is $4.00 a gallon! Hahaha!

 

Collins' suggestions:

#1 I agree!

#2 is expensive and sucks.

#3 worse than #2 except your friend may be able to take payments off of Federal Tax as bad debt, depending on their individual situation. CHECK WITH TAX ATTORNEY/ADVISOR ON THIS!!!! I AIN"T ONE!!!!!!

#4 not good. I would contact the OC like I did. See my post here

#5 ex hubby is a deadbeat and probably will not refi. This was an option in my divorce but I couldn't get it done, therefore the clause to return if I defaulted on the payment or insurance.

#6 would a lender actually do this? Worse than #2 & #3.

 

Just my humble opinion! Hope your friend can get things taken care of.

[collins135]

I never said that the options were not expensive or didnt "suck", all I said is that they were options. I again say that only the individual knows what is best for their situation. i just laid out the options.

 

And in your case, you still would have ended up with a negative on your cr had the ex defaulted. Good thing she did not default but the companies take the stance that it is still yours to pay.

 

It has been my experience that the companies and the courts do not simply let you walk away from a contract because of divorce no matter what is in the decree.

 

Whether an OC chooses to seek compensation after the fact is up to the company but I have seen no instance when the repo was not reported on the cosigners credit and when the companies, including CA;s did not come after the cosigner.

 

The best advise I can give is NEVER UNDER ANY CIRCUMSTANCES CO SIGN A DURN THING FOR ANY ONE!!!!!!!! NOT EVEN FAMILY.

 

All op's friend can do now is damage control. and in that has to decide what they can live with, either paying the money or living with the bad credit.

[drkaje]

Personally... I'd call the finance company and try to work out a deal where they took the bike back but didn't mess up my credit. I'd just pay the difference and let it be done or have them go after the ex. It would just come down to catching the right person on the phone. If the bike wasn't in my possession how's a dude to know if it's properly insured, registered, etc.. to stay in compliance with the financial agreement?

 

It's doubtful a divorce decree releases someone from a contract.

 

If all else failed.. one down, five up!!

 

I know of no instance when a voluntary repo does NOT hurt your credit. There is no way to just cancel out a contract other than paying it.

And no, a divorce decree DOES not release anyone from a contract.

 

You have to look at it from both parties prospective, if they just took the bike back, it is now considered "used" which is now worth less than a new bike and the company can not sell it as new and can not be reassured what condition the bike is in to take it back and cancel out the contract. Sorry but that is just bad advice and I do not know of ANY comapny that would do that, without making you responsible for the financial loss and thus showing it on your credit.

 

The bike was cosigned, which meant she agreed to pay if he couldnt. Now that he cant'/wont pay the onus is no on her to complete the contract. The onus is also on her now to make sure it is licensed and registerd and complies with all laws.

 

The act of divorcing does not release any one of the financial responsibility. So now the responsibility is on the friend to chose which action she would like to take.

 

Like I said, companies do not care about a divorce decree because it in no way is binding on the company, you will get no sympathy from them.

 

You have to decide what is more important, your finances or the whims of a spouse.

personaly, i would pick my finances and throw the ex to the wolves.

 

Agreed, but no ex is going to be cruising around in/on a vehicle I'm stuck paying for. Deadbeat, broke, spiteful, etc... I don't care. If the vehicle couldn't be collected it would have to go. People pull this kind of crap all the time betting they can get a few more free rides or that "the divorce was her fault, I ended up with a ton of credit card debt because of her so let her credit be screwed up too!!".

 

In the long run, reasons for the situation don't matter at all. She has to decide which solution hurts the least and be proactive. It's entirely possible the finance company has the option of taking the bike back without killing her credit. True, it would cost her dearly but there is probably a creative way to handle things that doesn't include $3 in gas and a lighter.

[NoMoreFEMA]

I never said that the options were not expensive or didnt "suck", all I said is that they were options. I again say that only the individual knows what is best for their situation. i just laid out the options.

 

And in your case, you still would have ended up with a negative on your cr had the ex defaulted. Good thing she did not default but the companies take the stance that it is still yours to pay.

 

It has been my experience that the companies and the courts do not simply let you walk away from a contract because of divorce no matter what is in the decree.

 

Whether an OC chooses to seek compensation after the fact is up to the company but I have seen no instance when the repo was not reported on the cosigners credit and when the companies, including CA;s did not come after the cosigner.

 

The best advise I can give is NEVER UNDER ANY CIRCUMSTANCES CO SIGN A DURN THING FOR ANY ONE!!!!!!!! NOT EVEN FAMILY.

 

All op's friend can do now is damage control. and in that has to decide what they can live with, either paying the money or living with the bad credit.

 

 

Collins--> I think you took my comment out of context or it was not clear. In this case, EVERYTHING sucks because divorce sucks. But alas, there are only a few choices. I also agree that the friend is the only one that knows what's best.

 

As far as being released from a contract that is a "joint account" or a co-signer type thing...you are correct. I never said that you were incorrect. I was lucky in that FMC stated they would probably not try to collect and I would "only" have to deal with a hit on my CR. Maybe the friend will get the OC on a good day and be able to get something in writing the way I did??? Either that or I got lucky and got one of the trainees

 

FYI...Not a chance for a repo because of the ex defaulting with FMC. She'd sell her soul to break 800!

 

Personally, I still feel that #1 is the best course of action if the friend can afford it. If she does get a contempt on the ex, he will have to pay her attorney fees. Not saying much when talking about a deadbeat, but it's something.

 

I also agree with drkaje's statement "She has to decide which solution hurts the least and be proactive. It's entirely possible the finance company has the option of taking the bike back without killing her credit.". Like I said, she might get lucky.

[NoMoreFEMA]

In the long run, reasons for the situation don't matter at all. She has to decide which solution hurts the least and be proactive. It's entirely possible the finance company has the option of taking the bike back without killing her credit. True, it would cost her dearly but there is probably a creative way to handle things that doesn't include $3 in gas and a lighter.

 

A public boat launch ramp is FREE!!!!

[drkaje]

Like they say down south: don't fatten frogs for snakes.

[collins135]

I didnt take your post out of context, I was just saying that I never said that they were good or bad options or that they would be option I would endorse for everyone all the time, but that those were simply the options that i knew of. I agree that divorce sucks big time and all you can do is deal with the aftermath, whatever that leads to.

 

I have seen many different cosign situations, one invloving my dad and brother. Dad is cosigned on bro's car, he rarely makes payments so my dad makes the ones he misses just to keep his good credit going, my dad has NEVER had bad credit. Anyways, It sucks for him because there is no way to sell the car, to far upside down (by about 6k) and bro has horrible credit and the car is a junker due to the way my bro drives it. He cant atke it away because then my bro couldnt find a job or go to a job and my bro has a kid to support. Its a mess. The only option my dad can live with is pay it when my bro cant. Diff people may have diff priorities though.

 

I too think #1 is best but some people still care for their ex or dont have the money or will for court so the outcome is different.

 

Personally, i dont see the finance company taking it back without killing the score, the economy is in the stinker and creditors are in a bind so they are going to want to minimize their loss and will more than likely pass that on to the consumers. And if the loan is all ready late or negative then they may not want to deal at all. I would rather have a few lates on my report than a CO/repo but that is just me.

[drkaje]

I didnt take your post out of context, I was just saying that I never said that they were good or bad options or that they would be option I would endorse for everyone all the time, but that those were simply the options that i knew of. I agree that divorce sucks big time and all you can do is deal with the aftermath, whatever that leads to.

 

I have seen many different cosign situations, one invloving my dad and brother. Dad is cosigned on bro's car, he rarely makes payments so my dad makes the ones he misses just to keep his good credit going, my dad has NEVER had bad credit. Anyways, It sucks for him because there is no way to sell the car, to far upside down (by about 6k) and bro has horrible credit and the car is a junker due to the way my bro drives it. He cant atke it away because then my bro couldnt find a job or go to a job and my bro has a kid to support. Its a mess. The only option my dad can live with is pay it when my bro cant. Diff people may have diff priorities though.

 

I too think #1 is best but some people still care for their ex or dont have the money or will for court so the outcome is different.

 

Personally, i dont see the finance company taking it back without killing the score, the economy is in the stinker and creditors are in a bind so they are going to want to minimize their loss and will more than likely pass that on to the consumers. And if the loan is all ready late or negative then they may not want to deal at all. I would rather have a few lates on my report than a CO/repo but that is just me.

 

Doesn't really seem like your dad is 'helping' the brother at all. Eventually your dad won't be able to float him and he'll either grow up or you'll end up making extra car payments.

 

Just seems that helping her out of bad situation might save them time/money in the long run. Suing her out of state ex to comply would take time and money. I guess it's still a matter of getting 'lucky' but it still seems trying to work something out with the OC first would be cheapest in the long run. The finance company may not decide to post the loan in a terrible manner if she finds a way to get things done with them. I seriously doubt it will be cheap but it still may be cheaper than paying the balance.

[mk_378]

Finding that he has violated the decree, the court could order him to give up ownership rights and surrender the bike to her so she can use it or sell it.

 

Can't do anything about the loan though. The only way to get out of a co-signed loan is to pay it off. No way no how will any divorce decree alter the legal obligation of both parties to the lender. The lender would have to approve of the new arrangement, and they never will.

[JustaFriend]

Thanks everyone for your suggestions. She realizes she is stuck paying the loan and would not have any problems selling the bike and just paying off the balance, but due to the fact the ex took it with him, she was curious if there was any legal way to make this happen - without having to wait the time it would take to pay off the bike - since it is only a few months old. Probably would get a much more back on the bike rather than waiting for a year or two making payments and him driving it around.

[DiggingOut]

To a creditor, the loan is the loan. They loaned money to two individuals - her and him - and both are liable for the full amount of the loan and interest until it's paid off to zero. Frankly, the lender doesn't care, has no reason to care, whether the two co-signers are married, divorced, sipping mai-tai's on a tropical beach or living in silence in a Trappist monastary. The divorce means nothing to them.

 

The court where violations of the provisions of the divorce decree count for something is the court where the divorce was granted. If she wants to file suit in court due to him not fulfilling the payment on the loan, that's a possibility. However, realistically, the court ruling on it again isn't going to do anything more for her than the requirements in the divorce itself have done, true?

 

A repossession would be a repossession on his CR and on hers.

 

They bought it in March, divorced less than a month ago, and he's already decided to not pay it. I sure don't see much likelihood that he will start stepping up to his financial responsibility about it now, nor sign it over to her and give her possession of the bike so that she can sell it to recoup a portion of the money to pay toward the loan.

 

Is the motorcycle titled in both names, or only in his? One outcome I could guess might happen is that he'll sell it and pocket the cash for it.

 

This is only a speculation, but -- has your friend wondered whether he had already made his private decision in March that he would soon be ending the marriage? Was he collecting a few extra toys to take away with him?

Has she thought through any and all other things which they had purchased or owed on, to watch carefully to see if he is going to try any other cute little games which can burn her, money-wise?

[drkaje]

She should be able to get the bike back.