What happens when a co-signer on a car loan files for bankruptcy?

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What happens when a co-signer on a car loan files for bankruptcy?

My husband’s mother signed on our car loan and was listed as the primary buyer. She filed for bankruptcy recently. We were told that even if we make the car payments, it is voluntary and the car will not be ours anyway since the judge listed the car under her bankruptcy. Is this true under CA bankruptcy law?

Asked on November 29, 2010 under Bankruptcy Law, California

Answers:

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

Answered 13 years ago | Contributor

If the car is technically her property and listed in the bankruptcy then yes, it may be true.  Have you been making payments all along?  Then I would see if there is a possibility that you can work this out with the trustee.  Maybe you can purchase the vehicle from the bankrupt estate or your mother in law can reaffirm the loan and take it out of the bankruptcy.  Consult with an attorney in your area on your options here as soon as you possibly can.  It appears that your interest may indeed be wiped out otherwise and all those years of payments made may go down the drain.  Good luck. 


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