On a loan, what is a co-signer’s liability in the event of a default?

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On a loan, what is a co-signer’s liability in the event of a default?

Mdaughter had a car reposessed. I co-signed for her but she called and is making monthly payments. Can they still garnish my wages?

Asked on October 17, 2010 under Bankruptcy Law, Michigan

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

When a loan is in default, the co-signer is liable for the amount of the loan (principal and interest) and may be subject to a wage garnishment or other collection methods.  The problem with the auto repossession is that when the car is sold, your daughter would be liable for the deficiency, which is the difference between the amount owed and the sale price.  The creditor could file a lawsuit and obtain a judgment for that deficiency.  As a co-signer, you would be named as a defendant in the lawsuit along with your daughter and both of you would be liable for the judgment.  The judgment would include principal, interest, the attorney's fee and court costs.


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