The Rights of a Co-Signer for a Car Loan

[QuantumMeruit]

I have been researching this issue for awhile now (IAAL, but don't practice anywhere near this area), and since this forum seems to have the best collection of collective wisdom on this area...

In Ohio, a very elderly relative co-signed for an auto loan for a "friend of the family" ("Deadbeat"), who has not made on-time payments. Grandma signed the promissory note as the "second" signer, but does NOT appear anywhere on the title. As far as I'm aware, there are no other documents she signed other than the note.

With payments on the loan 60+ days past due, the bank offset the outstanding payments with funds in a deposit account. Deadbeat has claimed he made two payments last week, but the bank has no records of any such payments.

We understand that Deadbeat has other creditors knocking at the door.

AFAIK:

1. Grandma is jointly and severally liable on the note, but she doesn't have anything resembling a perfected security interest in the vehicle. Self-help repossession is thus out of the question.
2. Grandma can do nothing to stop the bank from calling her, short of paying off the loan or refinancing the debt. FDCPA doesn't apply because the bank is collecting its own debt (for now).
3. We can sue Deadbeat on a theory of unjust enrichment and breach of oral contract to recover the funds offset by the bank. At the end of the day, we'd have a judgment entry which would put us at the back of the line behind his other creditors and behind outstanding child support. Blood out of a stone.
4. We can sue for replevin, but that gets us a vehicle (which does us little good) and the court gets to apply equity to carve up Deadbeat's (undivided) interest in the car, such as it is.
5. Even if we wanted to pursue theories like lack of capacity or predatory lending (arguing that Grandma had no idea what she's signing), Plaintiff's lawyers are unlikely to take such a case on contingency.

My hunch is that Grandma is screwed but I thought I'd check the collective wisdom of ExpertLaw before breaking the bad news.

[Mr. Knowitall]

I agree with your analysis, save for one thing - I think that you may be able to get a court to order the car sold and the proceeds of the sale applied to paying off the debt.

[lwpat]

This is why you should never co-sign. If she continues to pay, he will own the car. If she doesn't pay, it will be repossessed if they can find it and sold at auction. In order to protect her credit she will have to pay the balance. In the menatime, she has no rights to the vehicle. Best option is to find the vehicle and get him to sign a bill of sale over to her. Unlikely since he will have use of the car and his credit is already ruined.

[QuantumMeruit]

Thanks for the replies. I have mentioned several times to the family that it would be a bad idea (from a liability point of view) for cousin Joey to visit Deadbeat with a baseball bat in hand. Unfortunately, that is probably the only way we would get the vehicle signed over.

I shouldn't be -- but I am somewhat surprised that there aren't standard consumer forms available that would give a co-signer more legal rights. If the bank loan is a one-page standard contract, how hard would it be to have a standard form granting co-signers a subordinate security interest? I suppose many of the usual co-signers (parents, siblings) wouldn't want/need it, but for the rest...

[lwpat]

They are not interested in the rights of the co-signer, they are interested in their money. This is why you should never sign any type of contract without legal advice.

[deb0725]

I have been researching this issue for awhile now (IAAL, but don't practice anywhere near this area), and since this forum seems to have the best collection of collective wisdom on this area...

In Ohio, a very elderly relative co-signed for an auto loan for a "friend of the family" ("Deadbeat"), who has not made on-time payments. Grandma signed the promissory note as the "second" signer, but does NOT appear anywhere on the title. As far as I'm aware, there are no other documents she signed other than the note.

With payments on the loan 60+ days past due, the bank offset the outstanding payments with funds in a deposit account. Deadbeat has claimed he made two payments last week, but the bank has no records of any such payments.

We understand that Deadbeat has other creditors knocking at the door.

AFAIK:

1. Grandma is jointly and severally liable on the note, but she doesn't have anything resembling a perfected security interest in the vehicle. Self-help repossession is thus out of the question.
2. Grandma can do nothing to stop the bank from calling her, short of paying off the loan or refinancing the debt. FDCPA doesn't apply because the bank is collecting its own debt (for now).
3. We can sue Deadbeat on a theory of unjust enrichment and breach of oral contract to recover the funds offset by the bank. At the end of the day, we'd have a judgment entry which would put us at the back of the line behind his other creditors and behind outstanding child support. Blood out of a stone.
4. We can sue for replevin, but that gets us a vehicle (which does us little good) and the court gets to apply equity to carve up Deadbeat's (undivided) interest in the car, such as it is.
5. Even if we wanted to pursue theories like lack of capacity or predatory lending (arguing that Grandma had no idea what she's signing), Plaintiff's lawyers are unlikely to take such a case on contingency.

My hunch is that Grandma is screwed but I thought I'd check the collective wisdom of ExpertLaw before breaking the bad news.

Almost same scenario - My ex-husband and I split for a divorce. He buys an RV to live in since he moved out. This was in 2002, in 2003, he borrowed some money against the RV and deposited $1,000 in my Grandmother's checking account. The bank said she had to sign paperwork to get the $1,000. She did and went home without reading the stuff she signed too closely. It seems the ex added her as a co-signor on the note at some point and she had to sign the papers (story is a little unclear but she is 78 years old.) My ex defaulted on the note, disappeared after the divorce and my grandmother ended up in financial hardship because she was forced to pay the note with the sale of one of her rental homes. Now, she has a paid note and no RV. I located my ex husband in Houston recently, as well as found the VIN number AND the RV. He is in business with a very profitable event company here in Houston and I have all the contact info on how to get in touch with him, now what rights does my Grandmother have in Oklahoma to get the money back she paid for the RV? She is not on the title by the way.

The Bank tried to repossess it but had no way to find it.

Thanks for any advice.

Debbie

[seniorjudge]

Almost same scenario - My ex-husband and I split for a divorce. He buys an RV to live in since he moved out. This was in 2002, in 2003, he borrowed some money against the RV and deposited $1,000 in my Grandmother's checking account. The bank said she had to sign paperwork to get the $1,000. She did and went home without reading the stuff she signed too closely. It seems the ex added her as a co-signor on the note at some point and she had to sign the papers (story is a little unclear but she is 78 years old.) My ex defaulted on the note, disappeared after the divorce and my grandmother ended up in financial hardship because she was forced to pay the note with the sale of one of her rental homes. Now, she has a paid note and no RV. I located my ex husband in Houston recently, as well as found the VIN number AND the RV. He is in business with a very profitable event company here in Houston and I have all the contact info on how to get in touch with him, now what rights does my Grandmother have in Oklahoma to get the money back she paid for the RV? She is not on the title by the way.

The Bank tried to repossess it but had no way to find it.

Thanks for any advice.

Debbie

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