Will Defaulting on a Commercial Truck Loan Affect My Personal Assets

[jupanu_mur]

My question involves business law in the state of: Arizona.

Hello. I am a truck driver and I am self employed; I work for my self. I am the sole proprietor and I signed the loan information with my father as a co-signer. Since the trucking business has taken a serious plunge in the last year we are having extreme difficulties in making our payments. What I am trying to find out is how can we be affected if we default on our payments? Will the bank try to take away anything from any of us? Will our credit scores be seriously damaged? What is this the equivalent of (i.e. bankruptcy)? Can the bank take away anything else besides the truck itself? Are our personal cash reserves and/or any other assets at risk? The loan still has 2 years until being paid off.

[KeyWestDan]

If the value of the truck is less than the loan, not only will the bank take the collateral, they will also sue you and your co-signer for the difference, plus interest, court costs and attorney fees. Both your credit scores will be in the toilet and you will have sizable judgments against you... probably far more than what is owed on the loan. Then you have the option of bankruptcy which will screw you both for seven years.

Others might have some suggestions for you, like restructuring it with smaller payments and a longer term. I would recommend working your ass off until the economy gets better and keep your payments current.

[Mr. Knowitall]

This is apaparently a personal debt for you, and it's also a personal obligation for your father as cosigner. If you default, they will pursue you and your father for the money you owe (the balance of the loan less any money recovered after the repossession and sale of the vehicle, plus the cost of repossession and sale, late charges, interest, and other penalties provided for in your loan contract).

You can try negotiating with the lender to restructure the loan and get smaller payments. You can consider selling the truck and making up the deficiency (the difference between the selling price and the amount you owe) out of pocket. Anything else you do is likely to savage your (and your father's) credit, subject you (both) to collections, and could land you (both) in a collections lawsuit.