What are a co-signer’s rights regarding a defaulted car loan, if they also have another loan with the same lender?

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What are a co-signer’s rights regarding a defaulted car loan, if they also have another loan with the same lender?

I have a car loan with a credit union; I am current on my payment., I co-signed a car loan for my son with the same credit union; he is now 5 months behind. I received a phone call when he was 1 month behind but nothing else. Now they frozen my checking account and are making threats to repossess my car unless I pay the total amount off on my son’s car loan – not to just bring it up to date. Are they allowed to freeze my account for this and can they repossess my car. I received no notice in the past 4 months that it wasn’t being paid. What are my options?

Asked on December 7, 2010 under Bankruptcy Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

The rights that a lender has to proceed against other assets of a borrower (e.g. freeze your bank account or repossess your car) depends on what rights you have given them; i.e., in a case like this, it will depend on what was in the various loan agreements you signed as well as any general agreement(s) signed with the credit union, such as when you opened your accounts. At a guess, they can very likely freeze your account: it would be very common for one or more agreements in this case to give them that authority. It is less common but not impossible that the cars are cross collateralized, so that a car secures two loans. The thing to do is to review all documentation *carefully* and you can certainly ask the union to point out to you any terms or language giving them the authority or power they claim.


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