Car possession being threatened by Co-signer

Question

I'm in a bit of a sticky/confusing situation and I am unsure of what my options are.

My fiancé has a car that was financed through Ally bank. His father, who I'll refer to as John, co-signed for the car. The car title, I believe, is in John's name, as well as the insurance. (John did not list my fiancé as a driver on the vehicle at all, neither primary or additional)

My fiancé is currently living in England for school without a job so I have taken over his insurance payments and car payments.

I was originally giving John $500, in cash, on the first of each month. But after several months, I found out that the car itself was $369 and the insurance was only $71. Which meant that John was pocketing $60 every month. I didn't like being taken advantage of so I setup a separate account with Ally bank to pay directly. (I was able to do this by having my fiancé call in since he is also on the loan)

John had missed several payments and made only partial payments to Ally bank, which means that I now have to pay the late fees and past balances, even though I've already given him full payment plus the $60 that he has been over charging. I then told John that I was aware that he was over charging us and I did not want to pay through him anymore. After some arguing, John called his insurance agent to authorize me as a payer of my Fiancé's car, that my Fiancé has apparently never been a driver on.

John told me that he had paid November's insurance in advance and said that I needed to reimburse him for the month of November. I did such, but for the actual cost, which is $71.

So today John's agent informs me that he actually did not pay for November and that it was actually a month behind so now that I'm billed directly, I will have to pay for this month plus the last month.

So I stopped the check, which has made John pretty upset. John says that I have until this Friday to refinance the car or else he will tell Ally that he is forfeiting the car. (He also has the spare key in a locked safe, so he is also threatening to take the car)

So my only question is, how can my fiancé get out of this situation without destroying his credit?

I am curious what the outcome would be if we just give the car back to John and just stop paying for it altogether.

If possible I would gladly give the car back to John and let him deal with it. But only if my fiancé's credit score would not be impacted. I don't know much about this stuff so if there are other opportunities here please let me know! If there is a way that I could force him to sign over the title, then I think that would solve the problem of him being able to take or forfeit the car.

Thanks in advance

Answer 1

My fiancé has a car that was financed through Ally bank. His father, who I'll refer to as John, co-signed for the car. The car title, I believe, is in John's name, as well as the insurance. (John did not list my fiancé as a driver on the vehicle at all, neither primary or additional)

EDIT: Both John and fiancé's names are on the title

I'm not sure what the rules are given both names are on the title. That is a question for a lawyer. You may be able to get a good answer from a service like LegalZoom without breaking the bank. It's probably also worth starting a paper trail showing John's actions.

I would try speaking with the Ally representative directly about this. Ally certainly doesn't want the car, they want you to keep making payments. They may have policies in place that will work in your favor, such as making both parties sign off on any forfeiture.

It might also be worth lo-jacking the car so if John decides to come take it you know where it is.

Right now, you have very few options. John's credit (as well as your fiancé) has probably taken a hit because he's behind on the payments. Even if John wanted to sign the car over to you, he couldn't do so without Ally's sign-off.

DO NOT CONTINUE PAYING ANYTHING ON THE CAR UNTIL YOU HAVE A PLAN TO GET JOHN OUT OF THE PICTURE

EDIT: A commenter pointed out not paying anything will likely exacerbate the problem with Ally. Until you have a plan to move forward and extricate John from this problem save all you can. The fix won't be free, and you'll need all your cash on hand.

As I see it, you have 4 options

Let John give the car back.

Both John and your fiancé's credit will take a noticeable hit. This is currently what John is threatening to do.

Refinance the car into your name.

You'll have to get a car loan for the outstanding balance and have John transfer the car into your name, and pay off Ally.

As John has already lied about how he spent the money, you'll need to talk to the Ally representative and cut John out of the negotiation as much as possible.

This is the best option for saving fiancé's credit and getting out of this giant mess. I'm guessing if you were in a place to do this, you would have just gone and done it already.

Have John sell the car to a dealership and pay off the existing loan

This will save everyone's credit, but I'm guessing there is negative equity involved, which brings me to...

Get a personal loan to cover the negative equity and sell the car

I can't believe I'm writing this, but if you want your fiancé's credit intact and you can't refinance into your name this may be the best way. Dave Ramsey advocates doing this to get out of an upside-down car loan.

Usually, I'd say just keep making payments on the car until it's not underwater, but it sounds like John isn't going to play nice. At least this way, it takes the nuclear option away from John and puts you in control of the loan instead of him.

Only do this if you can't sell or refinance out of this issue.

EDIT: A commenter pointed out John can't be trusted to not pocket the money and nuke fiancé's credit anyway. You'll have to cut John out as much as possible and work directly with Ally on this one.

Money should never be handed to John