My mom made me co-sign a car with her when I was young because her credit was bad and she really needed a car. She stopped paying for the car and now it has been charged off. I am worried about not being able to do things like get an apartment because of it - is there anything I can do?
Your Mom has really messed up your finances.
As cosigner you are liable for the whole of the debt on the car. And worse, you have no right to use the car or even stop your Mom using it. Your Mom used you to get a loan which her finances didn't entitle her to, and by failing to pay it doomed you to the same terrible financial circumstances which she got herself into. As an adult, presumably with a decade or two of experience of how finance works, she shouldn't have done that.
By the way, you should have been contacted by the loan company long before the debt was charged off. That would have been the time to take action. The fact that a loan has been charged off will already have had a negative effect on your credit.
Your first step should definitely be to contact the loan company and find out 1) if the car has been repossessed 2) how much debt is outstanding. Not talking to the loan company will only make things worse.
You have two options:
- Pay off the debt your mom owes, which you should be able to do by making the same payments your Mom was making. If, as Harper says, the car has already been repossessed then the debt will be less than the value of the car, and this may be achievable. It's definitely the best option, because the other one is...
- Fail to pay off the loan, and take the hit to your credit. This will prevent you getting any kind of credit for a long time, and may well affect things like your ability to get an apartment.
You can try a couple of things:
- contact your Mom and try to persuade her to pay the outstanding debt (or some of it). If the car hasn't been repossessed maybe you can sell it and pay back some of the loan;
- contact the loan company, explain the situation, and see if they will accept easier repayment terms, and possibly a lower total payment. Harper suggests you do this through a lawyer, and that may be a good idea despite the cost.
Also make a vow to never cosign a loan again.
In addition to DJClayworth's excellent answer, there may be one other option - but it depends a lot on the details of how this co-signing happened as well as specific laws in your jurisdiction. You've mentioned that she "made you" sign the contract, but haven't provided any details on what that force consisted of. In many places, contracts made under duress are not legally enforceable. For example, if she was threatening to harm you. If so, it might be possible to no longer be responsible for the debt, and perhaps to clear it from your history.
However, you absolutely need to speak to a contract lawyer to explore this option - there's far too much legal complexity involved for randoms on the Internet to give a definitive answer on this.
"Charge-off" means 90-180 days have passed since she stopped paying, and the creditor has decided payment in the near future is unlikely. It's a tax status for them. However, it does not erase the debt.
You need to pay for the car
You agreed to co-sign so you are responsible for paying for the car, unless you signed while not of legal age, or were coerced.
You knew that when you co-signed, and if that resulted in some temporary peace in the family, now is when you pay for that. You knew the score. So it's time to adult up.
I gather by the fact that the debt was "charged off" that the car has already been repossessed. Now it just comes down to money ($$$$). They will have sold off the automobile, reducing the debt somewhat, and you need to pay the remaining debt.
Contact a lawyer or your local legal aid. Have them negotiate with the company that you will pay an amount to settle the matter in full. A condition of the deal is that the debt will be completely and totally removed from your credit report, and neither of you will disparage the other in any way including credit reporting. Most creditors will agree to this if it means getting paid. Also I recommend adding a condition that you agree there is a genuine dispute as to the validity of the debt, and so, any amount they consider forgiven will not be treated as income. That will keep you from paying some taxes.
The lawyer can dot all the I's and cross all the T's.
Wait until both you and they have signed the contract before sending any money.
Then you write a fat check and you're free and clear.
If you don't pay
Then the creditor will hold onto the debt for awhile, on the off chance you do decide to start paying. After awhile, it will "sell off the debt" to another company. That company will make collection efforts against you. After awhile, they will sell your debt to another company. They too will make collection efforts against you. This could go on for 20 years, although after 3-6 years they will lose the right to sue you for the money.
Your best outcome will happen if you settle with the original creditor. Once they sell the debt, that becomes impossible, since they don't own the debt anymore. Therefore you lose the ability to haggle with them to stop reporting it to credit bureaus. It's on your credit report for good at that point.
By "for good" I mean for 7 years after the last payment.
Yes, it will suck to find an apartment during that time. Your best bet there will be "housemate share situations", which are a cramped lifestyle, but at least you are homed, in the locale you desire. If you are crafty, you can also consider Tiny House on friends' property, or buying cheap land and building a Tiny House... or even #VanLife.
Unfortunately, "charge-off" doesn't mean that your obligation is gone. You could still hear from debt collectors for a long time if you don't address the issue now. You could contact the creditor and try to settle your debt.
It may be tempting to not pay a charge-off, since your lender has likely stopped trying to collect on the account. But as long as the debt is yours, you’re legally responsible for it until it’s …
- Discharged in a bankruptcy filing
Plus, that charge-off can hurt your chances of getting a loan — some lenders may ask you to pay all outstanding debt before you can take out a mortgage or other type of loan.
Well because others might look at this for help...
#1 - You should never co-sign, ever. But...
#2 - If you do co-sign then your name should be on the title (alone) and write a contract signing over the car in their name after all payments. That way if they miss payments, you then sell the car/whatever and deal with it as quick as possible.
#3 - If they do not agree to this, you are back to #1.
If the lender has not pursued you for collection, don't do anything. If they do, refuse to take their calls or respond to their letters, and watch your credit report. If anything appears on it, contact the credit reporting agency and dispute the mark. Tell them the debt is not legitimate and that it was taken out by another person in your name. Do not offer any more details than that on the nature of the illegitimacy. You do not want to be making statements they can try to prove are false. You only want to deny the legitimacy of the debt and leave the lender with the burden of trying to prove it's legitimate (which they will likely fail to do).
Do not have any contact with the lender whatsoever. Any contact you make with them will be used by them as evidence that the debt is legitimate.