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Advice on a legal-ish, car & credit related issue
Vrtra Theory
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I'm posting this for a friend to see if anyone has any experience in something similar, or even any general advice. For sake of clarity, I'll call my friend Alice, and the "once best friend and roommate but now worthless bitch" Betty.
Basically, Alice & Betty were friends from high school, and Alice trusted Betty enough to co-sign on her car loan (a used Toyota something, around $14k I think). Betty started slipping on rent, eventually paying almost nothing, but Alice endured this until she found out Betty was literally stealing from her (taking checks from her checkbook and using them to buy stuff, etc.). Alice kicked Betty out, but that wasn't the end of her troubles, because Betty began moving from place to place and couldn't be bothered to pay her car payments. Not only that, she'd never bothered to get insurance, so she was paying (or not paying, actually) for bank-provided insurance that was rather expensive.
Alice finally ended up driving over and taking the car using a spare key (not sure about legality on this one, but she's co-owner so it seems legit). Betty is basically out of the picture, but could be tracked down if necessary. The bank is currently taking money every month directly out of Alice's checking to make payments on the car, which are now very very late payments.
So, a number of questions:
a) Is it usual for a bank to allow you to sell a car with an outstanding loan? I mean, can you "keep" the loan and just sell the car? This seems like it would go against the whole idea of collateral, but seeing as how the car is worth maybe $7k and Alice owes almost $12k, maybe collateral isn't that useful to the bank. The loan officer Alice has talked to doesn't seem fazed by the idea that Alice is trying to sell it.
b) Is there anything Alice could get out of Betty if she were to file some sort of suit? The chance of getting any actual money seems slim, because Betty doesn't have any and doesn't seem inclined to make any. But, would it be possible to have the significant late payments removed from Alice's credit report or something like that? Or was she screwed the moment she co-signed?
c) Any other general advice? Having no paying roommate (she's currently looking for one) and paying for an "extra" car is a huge strain on her finances, so she needs to do something. But I'm not sure what.
Basically, Alice & Betty were friends from high school, and Alice trusted Betty enough to co-sign on her car loan (a used Toyota something, around $14k I think). Betty started slipping on rent, eventually paying almost nothing, but Alice endured this until she found out Betty was literally stealing from her (taking checks from her checkbook and using them to buy stuff, etc.). Alice kicked Betty out, but that wasn't the end of her troubles, because Betty began moving from place to place and couldn't be bothered to pay her car payments. Not only that, she'd never bothered to get insurance, so she was paying (or not paying, actually) for bank-provided insurance that was rather expensive.
Alice finally ended up driving over and taking the car using a spare key (not sure about legality on this one, but she's co-owner so it seems legit). Betty is basically out of the picture, but could be tracked down if necessary. The bank is currently taking money every month directly out of Alice's checking to make payments on the car, which are now very very late payments.
So, a number of questions:
a) Is it usual for a bank to allow you to sell a car with an outstanding loan? I mean, can you "keep" the loan and just sell the car? This seems like it would go against the whole idea of collateral, but seeing as how the car is worth maybe $7k and Alice owes almost $12k, maybe collateral isn't that useful to the bank. The loan officer Alice has talked to doesn't seem fazed by the idea that Alice is trying to sell it.
b) Is there anything Alice could get out of Betty if she were to file some sort of suit? The chance of getting any actual money seems slim, because Betty doesn't have any and doesn't seem inclined to make any. But, would it be possible to have the significant late payments removed from Alice's credit report or something like that? Or was she screwed the moment she co-signed?
c) Any other general advice? Having no paying roommate (she's currently looking for one) and paying for an "extra" car is a huge strain on her finances, so she needs to do something. But I'm not sure what.
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The bank doesn't care who pays the loan, as long as it gets paid. At this point, she probably wouldn't be "selling," so much as "paying someone to take it off her hands."
Yes, she can sue Betty, and almost certainly win. The judgment won't do her a lot of good, though, unless Betty comes into some money. The limit on small claims court will depend on your state/country, but that's probably going to be about as much trouble as it's worth going through. Alice can file paperwork so that if Betty ever inherits anything or wins the lottery, Alice will get first shot at the money.
1) No, she cannot sell the car and keep the loan. She can present a buyer for the car who is willing to buy it and take over payments, or she can plead for a bank loan for the remaining loan amount over the car's value so she can pay it all at once, but that's about it.
2) Just because she was a cosigner does not neccesarrily mean she's a co OWNER. I doubt betty is smart enough to care, but if Alice didn't show ownership on the title, she could be arrested for grand theft auto.
3) She could easily win a suit, but it's a civil suit, and there's no legal (IE criminal) ramnification to make betty pay. (at least in my state that's the way it is.)
4) I'd find a buyer quickly, use her good credit to get a loan for the rest to cover the cost of the car, be done with it, call the credit bureaus and report betty so it doesn't kill alice's score, and get on with her life.
She, as a co signer, is also responsible for the loan..the faster the car is paid off, the better. I really don't know how this would work, to keep the car, especially if she isn't on the title.
I don;t know if calling Alice and saying "transfer title to me and i'll pay the loan" is a good idea, becaus a quick call to the police will stop that. And it will get repossesed shortly after.
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Just one thing to keep in mind is that of the roughly $350 bill per month, almost half is the insurance. She's getting that insurance transferred to a more reasonable company, but the bank is requiring her to have full coverage because of the status of the loan. Any solution that eliminates the need to pay insurance will make the load significantly easier to carry, even if she ends up paying slightly more money total in the long run.
If she has her own car in addition to Betty's car, she might be able to file for "Planned Non-Operation" status on Betty's car which would significantly reduce her insurance bill.
the "no true scotch man" fallacy.