Disposition of Car You Signed For

Question: If I cosigned for an auto loan and the person I signed for passed away, am I responsible for the loan if I turn the car in?


Answer: Yes. They will sell the car at a low price at an auto auction and hold you liable for any deficiency (difference between the sales price and the debt.)

If you have title to the car (e.g., it was held in joint tenancy with right of survivorship), check the value in one of the standard price guides, take it to a dealer and offer to sell it. Get a quote in writing. Send the quote to the finance company and ask them to release the title for payment in that amount. You are still liable for any deficiency, but you are likely to get more than it would bring at an auction. If the finance company refuses to release the title, they may have violated the law and either barred themselves from recovering a deficiency, given you a claim for statutory damages, or both. A creditor is required to act in a commercially reasonable manner and to mitigate the damages resulting from such events as death of a borrower. Unless the ground of refusal is that the car can reasonably be expected to bring more than what you propose to get for it, it would not be acting in a reasonable manner.

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