I am having a problem figuring out the best way to handle this situation. My ex-husband bought a truck in Jan. 2006, which I signed the loan paperwork for--we were married at the time. When we filed for divorce in June 2007, the court gave the truck and the payments to him. He never made any payments, and left the state (and the truck) in Louisiana. The car company told me that I am responsible for the payments since the loan is in my name. I have made the monthly payments every month and paid the insurance so that I could sell the vehicle. He FINALLY signed the paperwork authorizing me to sell the truck (giving it to me, basically) in June of 2008. By then, the economy was tanking and I couldn't unload it. I owe almost 11,000 on the truck, but can't get more than 6000 from a dealer. If I sell it through the paper I could maybe get 8,500, but I don't have the money to cover the difference. I am a grad student and my credit is tanked anyway, because of various things associated with the divorce. The ex is homeless and mentally ill-there is no way to get money out of him. What options do I have? I can't afford the $500/month in car payment+insurance on a vehicle that I don't drive when I only make $1200/month! I have been making the payments with student loans.
Even though your divorce decree ordered your ex-husband to make the payments on this truck, because he has not met his obligations under the decree, the lender has every right to pursue you for the collection of the debt. Thankfully, you seem to have correctly deduced that the person to whom you need to look, legally at least, to make you whole is the one who caused all the loss -- your ex-husband. You may need to return to divorce court to get a judgment against him for the monetary damages caused you by his refusal to make the auto payments as ordered by the divorce decree and his willful delay in executing the documents transferring title and allowing you to dispose of this needless drag on your finances. I also understand your concern when you imply that collecting a judgment against him is never going to happen. Please call the attorney who represented you in the divorce to discuss the situation and to ask for advice. I feel that you should file suit against your ex-husband and obtain a judgment to make a record of exactly what happened that led to this situation. I also realize that you are having a hard time stretching your income to cover your current expenses, and that this legal case may turn out to be a pyrrhic victory at best. However, his mental condition may prove to be temporary, and a signed and sealed judgment against him when he recovers would be nice to have, especially if his financial prospects improve enough to allow you to collect your damages. You should speak with your attorney about the costs and potential benefits of filing a lawsuit against your ex-husband, and use the information the attorney provides to make an informed decision about how to best proceed in this case.
You are also absolutely correct in attempting to sell the truck yourself, as doing so should maximize the sale proceeds. In fact, you should keep any stage of the repossession process under your control whenever possible; lenders are notorious for selling vehicles for much less than the fair market value, leaving consumers liable for excessive deficiency balances after the sale. Technically, lenders are required to take steps to ensure that they receive a fair price for any repossessed vehicle. However, in most cases, vehicles are sold “as is” in hastily arranged and less-than-transparent transactions, and for much less than the vehicles are actually worth on the open market. These “auction sales” should not be relied on to produce the best price for the truck; every dollar not produced at the sale is a dollar that you legally owe the bank. Many auto lenders are regularly sued over their sloppy repossessions procedures. If you are forced to allow the lender to take possession of the vehicle, you may have no choice but to allow it to conduct the sale, but you should try to negotiate with the lender to allow you to retain possession and complete the sale yourself, with the proceeds being applied to your loan balance.
After the repossession is completed, I would encourage you to concentrate on your studies and forget about the whole experience for awhile. You might call the bank and see about setting up a very low monthly payment. If the lender will not accept monthly payments which you can afford to stop its collection activity, you may decide to let it lie for the time being; your education, not this debt, is your greatest priority at this point in your life. If the creditor sues you for the amount owed, you should decide if you want to set up payments or get it settled; most lenders will accept a portion of the amount owed, say 40% to 50% of the balance, to settle old uncollected obligations. To read more about the various options available to assist consumers who are struggling with debt, I encourage you to visit the Bills.com Debt Help page at http://www.bills.com/debt-help/. You should definitely not use your student loans to make payments on this obligation, as student loans are generally non-dischargeable in bankruptcy; by paying with your student loans, you are converting a dischargeable debt into a non-dischargeable obligation, which could limit your ability to include the debt in bankruptcy if you ever find it necessary to do so.
If this is your only debt, I would suggest that it is too small a balance (possibly around $5000 once the repossession in complete, based on the information in your question) to warrant your filing for bankruptcy protection for this account alone. However, if you have a substantial amount of other non-student loan, unsecured debt that is causing you financial hardship, you may need to have an extensive consultation with an experienced bankruptcy attorney in your area. Filing a Chapter 7 bankruptcy case could discharge all unsecured, non-priority debts (i.e., not student loans, taxes, etc.) you owe, including any deficiency balance left on the truck loan. Since repossession has not yet commenced, your bankruptcy attorney may also be able to arrange for the return of the vehicle to the lender as part of your bankruptcy case, allowing you to avoid the unpleasant repossession process altogether. To read more about bankruptcy, you can visit the Bills.com Bankruptcy page.
As you can see from the information above, there are several possible resources available to assist you in resolving this debt. I encourage you to review the websites listed to educate yourself about your various options so you can make an informed decision. I also strongly recommend that you consult with an attorney as soon as possible to discuss this situation and determine what recourse may be available to you. I wish you the best of luck in resolving this unfortunate situation, and hope that the information I have provided helps you Find. Learn. Save.