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- 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.
- Start your FREE debt assessment
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?
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
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Did you know?
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Auto loan debt was $1.62 trillion and credit card was $1.12 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in Wisconsin, 20% have any kind of debt in collections and the median debt in collections is $1642. Medical debt is common and 11% have that in collections. The median medical debt in collections is $943.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
10 Comments
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.
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.
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.
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.