If someone signs a car loan as a favor to someone else and that other person stops making the payments, what can the signer do?

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If someone signs a car loan as a favor to someone else and that other person stops making the payments, what can the signer do?

My mother signed for a new car as a favor to her nephew. He stopped making payments now she is stuck with debt. Car lender transferred the debt to another company which, for whatever reason, will not send her monthly statements so that she can see what she’s paid. Debt is over $20,000; she’s already paid over $5000 but stopped paying once they stopped sending statements (something they agreed to do).

Asked on November 18, 2010 under Bankruptcy Law, Florida

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

While you mother does have a right to insist on proof of the debt--i.e. the statements, so she can verify amount owed, how it's calculated, and that her payments are applied properly--she also has to pay  the amounts due; and if fails to do so, she will be in default on the debt. Once in default, she could be sued for the amount due and will suffer damage to her credit rating. The problem is, each signor on the loan can be held liable for the full amount; the creditor can decide which debtor(s) to proceed against, and if the nephew has few assets or income, they may have decided that your mother is the one to sue.

There may be little she can do about her obligation to pay the creditor, but she may have grounds to sue the nephew to force him to make payments. (Possibly, if she does, she can at least get a settlement in which she gets the car and can sell it to satisfy at least part of the debt.) She should speak with an attorney about doing this.

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You Mother has every right to demand that statements be sent to her and every right to demand an accounting of the entire debt from the signing of the agreement until now.  She needs to send a letter by certified mail to the other company (have her call and get the full name of a supervisor and their real address andnot a PO box) so it is addressed to them directly.  Tell them that if they do not comply that she will contact the State Attorney General's Office and report them under the Fair Debt Collection Practices Act to the appropriate agency.  Then she needs to sue her nephew.  Good luck. 


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