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How Do I Remove Myself As Co-signer on a Loan

I bought a motorcycle a year ago. Now the finance company won't honor a clause the dealer wrote into the loan. What can I do?

I co-signed for a motorcycle in Jacksonville Florida over 12 months ago at a Harley Davidson dealership. In the contract the finance officer and me put in there that after 12 months my name would come off of said loan. All payments have been made on time in fact every two weeks. More than the amount of the payment is also sent. Never has been late either. We call Harley Davidson finance company they own it. Now they say that the finance officer should not have written that and it is not legal. That the laws of Nevada apply for the loan. Not Florida laws. I have the contract no were in the contract does it mention Nevada or laws of that state. They are refusing to take my name off as a co-signer. The original owner does not want to re-finance we got a good rate at 2.9% if we have to re-finance everyone even HD is at 9.9% we would lose. My engine just blew up so I want a new car but this loan is reflecting on my credit and everyone says I have to get that taken care of. I do not have any other bills, own my home for several years. I pay for everything in cash. I don't use credit cards. My credit rating is good. How can I to get off as co-signer if the Harley people will not take me off even though I have it in writing they will?

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Bill's Answer
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Updated: Sep 23, 2014

Erase Debt With A Bad Credit Consolidation Loan
Highlights

  • Contracts are written to lock co-signers in.
  • Refinancing is the best way to remove a co-signer.
  • Bankruptcy will also remove a co-signer's liability.

In general, loan contracts are written to not allow a co-signer to withdraw from the contract at will. There are no, “We are not friends anymore so I want to be released from my co-signer liability” clauses in any loan contract I have seen. If the primary borrower stops making payments, the co-signer has 100% liability for the unpaid debt. There are four ways to relieve a co-signer from a loan’s liability:

  • Refinance the loan in one name only
  • Sell the item secured by the loan and use the proceeds from the sale to retire the loan
  • File for chapter 7 bankruptcy
  • If your signature was forged on the loan application, file a lawsuit against the borrower and ask the court for relief

If the loan in question is a student loan, some lenders allow for the release of the co-signer when basic requirements are fulfilled. See the Bills.com article Co-signing a Student Loan to learn more about co-signing a student loan.

The Facts Here

To paraphrase your facts, a motorcycle dealer in Florida wrote a contract to finance a motorcycle. You are a co-signer. All payments are made in a timely manner, but you want out of the deal because of the impact on your credit rating or debt-to-income ratio. The Florida dealer wrote terms that, one year later, the Nevada finance company refuses to honor.

It would be unusual for a lender to write a clause in a loan agreement that would allow a co-signer to remove him or herself from an agreement, and I am not surprised that the finance company would balk at this. Under normal circumstances, the only way you can extract yourself from this type of contract is for the other cosigner to refinance and put him or herself as the borrower. However, the Florida dealer wrote this clause into the contract, both parties signed it, and the Nevada finance company never raised this clause as an issue over the last year.

I recommend you and the cosigner to speak with an attorney in Florida with experience in consumer law to determine what your rights are under Florida law. My guess is that the Florida attorney will use a legal doctrine called “laches” to ask a Florida court to enforce the clause.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

60 Comments

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  • CM
    Apr, 2014
    Chuck
    My wife and I are getting a mortgage and I co-signed for my sister for a car. She went to school and got several student loans. She pays everything on time and owes 12k left on the car and planed on paying it off with her income tax but only only received about 6300$ so she still owes a little over 5k. One stipulation was I get my name off that loan. We sign next week. What should I do for my name to come off. She needs to put in for another whole loan can she do it where she has so many student loans? I mean she makes great money she works for the IWK.
    0 Votes

    • BA
      Apr, 2014
      Bill
      Whether she qualifies for a loan will depend on her debt-to-income ratio, her credit score, and credit history.

      The only way to find out is for her to speak to some lenders and hear what they say. The lender will look at her credit report and compare the size of her monthly obligations (her mandatory student loan payments) and the monthly loan payment on a new loan against her income.
      0 Votes

  • HW
    Dec, 2013
    heather
    I co-signed on a $150k loan for my mother. At the time I thought I was "vouching" for her I hadn't a clue to what I was actually doing. Fast forward 10 years. Now I know. Now she has defaulted on the loan, went into bankruptcy and is letting her house go. This process began 2 years ago. I am not wealthy. I work for a non-profit and my husband for a warehouse. We do live debt free and work hard at it. Wondering what comes next in this process for us. I am really confused. Worrying a lot....I have received no paperwork at all from anyone.
    0 Votes

    • BA
      Dec, 2013
      Bill
      There is no way to know for certain how the creditor will proceed. It is within its rights to try to collect from you, if you co-signed the loan. Unfortunately, if they contact you and you can't work out a payment plan, they could come after you for the debt remaining on the balance, after the house is sold.
      0 Votes

  • JR
    Nov, 2013
    Juanita
    About 10 years ago I co-signed for my sister to undergo breast augmentation (I was 18 and in college) (she was starting a new jobs 2 months after). She was paying installments the first 6 months post-surgery but then stopped all together. We were both sued by the Dr. and although we didn't report to court and have never replied to collection agencies, they have continue suing us, and even 5 yrs ago took money out of my bank account without my acknowledgement (had to close it) never been able to open an account o my name. Today I'm married with kids, and we moved to a new house and began getting those letter again (Dont want our things garnished). She has 5 kids, no job, and refuses to pay. What can I do in this case, and if i decided to pay it can i sue her so she can pay me back somehow? How come they only harassing me and not her?
    0 Votes

    • BA
      Nov, 2013
      Bill
      All co-signers have up to 100% liability for a debt. The creditor may pursue one or both co-signers for payment, and can legally demand one or the other to pay up to 100% of the balance due. Or, it can collect 40% from one and 60% from the other, or any combination it wants up to 100%. It may be unfair for the creditor to pursue you alone, but that is its right under law.

      It appears the creditor has a judgment against you. Your first step is to consult with a lawyer who has consumer law experience to learn when the judgment was filed against you, when the judgment expires, and if your state allows the judgment-creditor to renew the judgment.

      You ask what you can do. I see three options:
      • Negotiate a settlement with the creditor. Note that "settlement" here may mean a lump-sum or series of payments totaling less than the amount due to retire the debt. Then, as you suggest, try to collect the amount you paid the creditor from your sister.
      • File bankruptcy. Consult with a bankruptcy lawyer in your state to learn if you qualify for a chapter 7 or chapter 13 bankruptcy. If you qualify for a chapter 7, you can put this matter behind you for a relatively small cost in a short period of time. Doing so would remove your liability for this debt, leaving the other co-signer as the only person legally responsible for debt.
      • Continue to weave, dodge, and otherwise try to avoid the judgment-creditor until the judgment expires.

      It is not fair you, who did not benefit from your sister's procedure, are receiving collection calls. But as mentioned, the the law allows a creditor to collect from any co-signer up to 100% of the amount due. Your story is a cautionary tale for anyone asked to co-sign a loan.

      0 Votes

  • KK
    Nov, 2013
    Kay
    A friend of mine bought a car in GA and her boyfriend co-signed for it . She paid all the costs and insurance and pays all the payments. Since then, they have broken up and he has filed bankruptcy. Now he is demanding the car, even though he never made a payment. Can he take her car.
    0 Votes

    • BA
      Nov, 2013
      Bill
      There are written, spoken, and implied contracts. Here, I will guess the boyfriend was a co-signer so the girlfriend could qualify for the loan. I will further guess the parties agreed either by using words or by implication, the car was hers, which is why she's making the monthly loan payments, paying for the insurance, maintaining and using the vehicle.

      Your friend should consult with a lawyer who has consumer law experience immediately. The lawyer will write a letter to the boyfriend explaining the spoken or implied contract between the parties trumps the title, and that if the boyfriend takes possession of the vehicle she will report it as stolen.
      0 Votes

  • AC
    Mar, 2012
    Althea
    Hi there, I got an experience of being a co-signer for my sister's student loan 7 years ago. I'm an active military member, Once i get my PCS here in Florida, the American Education Services sent me a letter of my sister is delinquency in payment. So, Because she is my sister and i trust her, i called her and told her about the notice that i got and she told me that, she already made a payment,just disregard the letter i got. And last July 2011 i got deployed in Iraq and once i got back January 2012, i got this notice that i need to pay the full amount left in the loan because they can't contact my sister. And since I cosigned that loan I'm aware of the responsibility. I call the Loan Agency right away and told to me that if i pay the full amount it will not the hurt my credit score. So, I know i don't have a choice, the next day i paid it. Not a credit card but in my own cash. I don't use credit card just to let you know. I always make advance payment in all my bills. And now the hard part, I just got my new vehicle and when i need to get a loan to my own bank, They denied me because a have a full credit score and did reflect the delinquency payment of that student loan i co-signed. Now i wanna know if there's anything i can do to fix and erase that bad credit history in my name? My point is, during the time they are sending me the notice of delinquent payment, I'm not aware of that because I'm deployed! But once i got back in florida and saw that letter, right away i call them and paid that loan. Is there's any legal steps i can do to fix it? Just wanna know because it's really hurt my credit score an the fact that it's unfair in my side because I'm not aware of those notices that they are sending me. Hope to get a reply. Highly appreciated in advance.
    0 Votes

    • BA
      Mar, 2012
      Bill
      You described the consequences a co-signer faces when the primary borrower defaults on a loan. Not only does the co-signer suffer harm to their credit score, but also has liability to repay the balance due if the primary stops paying altogether.

      You mentioned being an active military service member. Under the Servicemembers Civil Relief Act (SCRA), a federal law, special protections exist for those on active duty or who recently completed active duty regarding their financial obligations. I confess I am not well-versed in the SCRA, but based on my limited understanding of the act, creditors are not barred from reporting delinquent debts of active duty members to the credit reporting agencies (the credit bureaus). Consult with your local judge advocate general to learn if the SCRA applies to any part of your issue.

      If not, consider writing a letter to the lender explaining your situation, and ask that as a matter of good will, it remove the derogatory mark from your credit file.
      0 Votes