Question: I’m a 19 year old woman living with my former coworker. We bought a $15K car back in May and I was accidentally the co-signer without my knowledge. We got the car because I had a 750 credit rating and my roommate's credit was 500. After we got the car in May, within a week and a half she totaled the car and took me off the insurance policy. Keep in mind she hasn’t made a single payment on the car. ‘Til this day the car sits in the towing company as abandoned because she never had comp and collision. I’m at my wits end. Any suggestions here?
Answer provided by: Cary L. Flitter, Esq. from the law firm of Flitter Milz, P.C.
The situation you describe is common. We get calls every week from folks who cosign knowingly, and from others who didn’t really understand or appreciate what they were getting into. Parents or grandparents co-signing for children; siblings; and most often lovers/fiances. Our general advice to a potential co-signer is, unless 1) you are co-signing with a spouse, or 2) you are prepared to pay for the entire loan (effectively making a gift in that amount to the other borrower) do not co-sign anyone’s loan! Many people do not realize that a co-signer is liable equally with the other buyer or borrower. Especially in auto loans, there is usually no “primary” borrower or guarantor, just equal co-signors. In other words, the auto lender does not distinguish between A, who wants to buy and will drive the car and promises to make the monthly payments, and B who is merely helping A with credit, and does not expect to drive the vehicle or to be liable on the loan. Many people have had their otherwise fine credit damaged by co-signing for someone who is irresponsible or who perhaps just fell on bad luck or loss of their job etc. So, DO NOT co-sign someone else’s loan!
Now, that said, you are in the situation already. The first thing I would do is to check out the insurance. If this car was financed through the dealership, the lender would have required the buyer/borrower to obtain full insurance: liability, collision and comprehensive. Otherwise, if the borrower gets into an accident, the collateral for the loan is destroyed; lenders do not operate like that, they insist on insurance. Find out from either your friend or the car dealer who the insurance carrier is. You can then file a claim as you are a co-owner and would be an insured under that policy. Act promptly, as delay can hurt you and file it whether or not your friend joins in the claim. If the car is totaled, the claim should be approved and the insurance company will pay the lender. At most you might be left with a fairly small "gap" to pay. Remember, you are liable for any charges or shortfall just as your friend is.
Finally, when it comes to car dealers, beware. Some are more honest than others. Every car dealer can un-do (the dealers call it “unwind”) a deal the next day, and for several days. But they are usually not legally obligated to do it, and never want to accept cancellation. Contrary to popular lore, there is no 3-day right of cancellation for an auto sale or finance in Pa. Tips for financing a car and dealing with car dealers are the topic for another column. Good luck, and file that accident damage claim ASAP!
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More about this Montgomery Bar Association member-panelist (bio provided by this attorney prior to publication):
Cary L. Flitter practices consumer law with Flitter Milz, P.C. located in Montgomery County, PA. Flitter serves on the adjunct faculty at Widener University - Delaware Law School, and Temple University Beasley School of Law, where he teaches Consumer Law and Litigation including the law of Credit Reporting, Fair Debt Collection Practices, the law of repossession, consumer protection and class action. He has guest lectured on consumer law issues at Harvard Law School, The University of Pennsylvania Law School, Villanova Law School and other venues. Cary has been the recipient of pro bono awards from Montgomery Bar, the Pennsylvania Bar Assoc and the Penna Legal Aid Network for providing help to low-income consumers. www.ConsumersLaw.comSubmit your anonymous legal questions to AskARealLawyer@montgomerybar.org.