Stopped Making Payments on Auto Loan

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READER QUESTION

My fiance's ex-spouse stopped making payments on a vehicle loan in my fiance's name. What can we do?

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Bills.com Resident Expert
Dec 12, 2011
HIGHLIGHTS
  • All co-signors are obligated to repay a loan.
  • There is no, "We broke up so the loan is canceled" clause in any contract.
BILL'S ANSWER

Your fiancé’s ex needs to consult with an attorney licensed in your state to determine what action this creditor can take against him to enforce the debt his ex is unable to repay. In most states, a creditor can garnish a consumer’s wages, levy his or her bank accounts, or even take action to seize property, as it has threatened in your case. Auto repossession is the most typical path to recovery, for a delinquent auto loan. If your fiancé was not a guarantor on the loan, and you do not live in a community property state then I would ask the attorney if he has ANY obligation to the loan for repayment... but I suspect it was co-borrowed, in which case both parties are obligated to the loan.

However, before a creditor can undertake a garnishment, it must first file a lawsuit and obtain a court judgment against the debtor. Even if this creditor has a judgment against your fiancé, I would be very surprised if it would actually try to garnish him. Most states exempt a portion of the value of a vehicle from creditor execution; for example, California consumers can exempt up to $2,550 of the equity in their vehicles from their creditors. Before this creditor can auction your vehicle, it must pay off the current secured auto loan and reimburse for her state exemption. Since many Americans owe more on their vehicles than their property is worth, seizing a judgment debtor’s vehicle is often a losing proposition for creditors, especially considering they usually receive significantly less than the vehicle is worth at a judgment sale. In addition, unsecured creditors, such as those that issue credit cards and personal loans, may not want to seize consumers’ property due to public relations issues; consumers may be hesitant to use credit cards or personal loans if they think that they could lose their home or car in case of default. To read more about your state laws relating to the enforcement of consumer judgments, I encourage you to visit BCS Alliance.

You should know that collection agencies frequently make threats which they often cannot or do not intend to act upon in an effort to convince consumers to pay old debts. As I said, an unsecured creditor cannot seize any property until it has filed a lawsuit and obtained a judgment; despite this fact, few creditors actually choose to pursue legal action against consumers. This creditor is likely making these threats to frighten your fiancé and make him think that he must pay this debt immediately. To make sure that you are making an informed decision regarding how your fiancé should proceed with this debt, I again encourage him to consult with an attorney in your state to discuss what action this creditor can take to enforce this debt.

To learn more about the various options available to your fiancé to help her resolve this debt, I encourage you to visit the Bills.com Debt Help page.

I wish you the best of luck in resolving this debt, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com

Comments (4)


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Bills.com
September 16, 2009
Keep in mind that your credit report is only as accurate as the information given to the credit reporting agencies, and that information is suspect. According to a 2004 Federal Reserve Board report, 79 percent of credit reports may contain some type of error and that about 25 percent of all consumer credit reports may contain errors that can result in the denial of access to credit. You need to look at the judgment documents themselves to determine how much you owe, and to whom you owe it. Depending on your state law, a creditor with a judgment against you might be able to place a lien on your property, freeze your bank accounts, and/or garnish your wages. It is important that you research your state's laws to determine what action a creditor can take against you. Visit Bills.com's State Consumer Protection Laws and Exemptions resource to learn your rights in your state.
Avatar
ANGELA S.
September 16, 2009
I THINK I RECENTLY HAD 2 JUDGEMENTS PLACED AGAINST ME FOR 2 PERSONAL LOANS. WELL WHEN I CHECKED MY CREDIT, ONE OF THEM IS SHOWING A ZERO BALANCE. WHAT DOES THIS MEAN? THE OTHER IS SHOWING AN OUTSTANDING BALANCE. MY QUESTION IS I'M NEEDING TO PURCHASE A VEHICLE, CAN THE LOAN COMPANY COME AND TAKE THE VEHICLE I'M GONNA PURCHASE EVEN IF I DON;T PAY FOR IT STRAIGHT OUT, IN OTHER WORDS, I WILL BE MAKING PAYMENTS ON THIS VEHICLE. CAN YOU HELP ME TO UNDERSTAND?
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Bills.com
February 04, 2009
Yes, they are legally entitled to take you to court, and if they win a judgment against you then they can be awarded wage and/or bank account garnishments, depending on state laws which you can check for here: http://www.bills.com/collection/laws/.
Avatar
Marty C.
February 04, 2009
How far can finance companies get in trying to collect signature loans, besides the constant calling and one of them totally embarrassing me in front of other customers when I went in to their office to explain why I was behind on my payments. I keep renewing the loans just so they stop calling me, this month I can not make the pyments but they will not work with me. Can they take me to court?
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