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Dangers of joint purchase of cars and other property

One of the more common inquiries we get is along these lines: "I signed on car loan with my boyfriend. Now we split. How can I get off?"

The answer is, you can't. The creditor extended credit to both of you. You are both legally obligated. There is no reason why a creditor would release one of you without either paying off the loan or at least making a very substantial payment on the loan. Sometimes the parties are both responsible and have the ability to refinance. Sometimes not.

Here is some more bad news. If one of you has the car and isn't making payments, the party not in possession may not have any legal right to repossess the car and sell it or turn it over to the creditor. You can repossess a car with a "security agreement" as defined in the Uniform Commercial Code. Most people who enter into this sort of arrangement are not thinking of the future and do not write up a security agreement. Sometimes the creditor can be persuaded to repossess the vehicle. If done correctly, that is a serious bad mark on the credit of both borrowers.

Some good news. In Illinois the creditor is obligated to give written notice of default to the party not in possession. 815 ILCS 505/2S. Often they don't, which may create a defense to liability. That doesn't mean you won't be sued, but you may be able to escape liability.