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My mom co-signed on a car loan for me through a financial company 5 yrs ago; she then chose to pay it off and have me make my payments directly to her last year. We had a verbal agreement of what my monthly payments were and that if I didn’t make them the car would in fact, be taken back by her to sell. Soon I lost a major portion of my income and was unable to make full, consistent payments. I sent partial payments that were sometimes late and some months I was unable to make any payment. I kept in open communication via email & phone to let her know what to expect. She would respond neutrally, mostly not addressing it. She recently sent me a certified letter after a fight telling me to pay her what is left owed to her on the car or to return it to her to sell. She also said I would be responsible for the difference (if any) if the car did not sell for what I owed her. We have no signed contract at all; and definitely no verbal agreement saying I would be responsible for the difference if the car was taken.
I relinquished the car to her; there was some small body damage and the check engine light was on. She sold it to her friend for less than what was owed because of the damage; the car did not pass smog and now she wants me to pay for the difference and to fix it to pass smog. I say hell no, that’s her problem now. I live in California and from what I can tell I’m no longer responsible. She wants to take me to small claims court and I feel confident she has no case because we did not have any agreement that I would pay the difference if she sold the car. She’s under the impression that she has the same rights as a financial company because she is lien holder on the title. Is this true? Is there an unspoken agreement that she is exactly like a real company? I figure even companies should have to tell you all the rules up front and not spring it on you later.
her credit isn’t affected bc she already paid it off to the lender last yr.
**I spoke to a lawyer and she DOES NOT get the rights of a lender. The lender has the rights they do because it is in the signed contract. I have fulfilled my end of the agreement by relinquishing the car and the contract has been followed in whole.

7 Comments »

1. 

   . . . and this is your MOTHER?!?!?! Sheesh! I suggest you meet with an attorney NOW, and put an end to this nonsense! In the long run it will probably be a lot less expensive, too.

   Comment by Mary — June 25, 2011 @ 9:03 pm

2. 

   Sounds like your mom is completely within her rights here. This is exactly what a finance company would do to you in the same situation. Here, she is the finance company. Check with your attorney, but ultimately she is going to be the winner here. Remember, I’m talking strictly from a business point of view, and has nothing to do with her treatment of you. Those issues are going to have to be worked out between the two of you.

   Comment by Paulster2 — June 25, 2011 @ 9:03 pm

3. 

   As painful as it is she is teaching you a lesson for the future yes, she is correct in this matter i know that it hurts for your mother to act in this manner but as co signer on the car she can do as she sees fit. Since she sold the car to a different party you are responable for the remaining payments yes this is how a "real company" works. Mom want to protect her credit which she used to to secure the loan . If she takes you to smal claims court she will win leaving you in a deeper hole with the cost of the car and court costs.

   Comment by Julie B — June 25, 2011 @ 9:03 pm

4. 

   A lot of what the other people are saying is correct. You may be responsible for any differences. But at the same time your mom is playing banker & it doesn’t sound as if she should have. The burden of proof will be on her. She’s the one who chose these actions. Selling a used car to another person w/ a check engine light on is their problem. Like any used car, the buyer assumes all responsibility of the car. I feel your pain, but let this be a lesson in life learned. You don’t do business with the family. Not like that.

   Comment by The Eagle Keeper — June 25, 2011 @ 9:03 pm

5. 

   She did something to help you out by cosigning to begin with, and then helped ever more by paying it off and allowing you to pay her, which you didn’t. You blew it off, after all, it’s only mom and her credit isn’t affected. Great attitude.

   Well, obviously she is tired of it. Pay what you owe, or return the car to her to sell so she can recoup her losses. If you owe more than what the car will sell for, do you expect her to just write that off?

   Do the right thing.

   Comment by oklatom — June 25, 2011 @ 9:03 pm

6. 

   Its unlikely she will actually take you to court and if she does, it doesn’t mean she will win. Its up to what the judge believes.

   Plus, just because she wins doesn’t mean you have to pay her. Its up to her to collect.

   For all practical purposes, you lost the car and that will be the end of it.

   It would cost money for her to sue you. Its not guaranteed she would win and even if she did, how would she collect ?

   You are effectively judgment proof by not having any assets.

   However, despite the lack of any written agreement or way for her to force you to pay, you DO owe her the money, just as if you owed it to a bank.

   Morally, you should pay.

   Even if she never sues you and you never pay her another dime, you still owe her regardless of any paperwork.

   Its assumed that in the event of a default, the defaulter, that’s you, would owe the difference.

   And its possible a judge would even agree with her despite the lack of paperwork.

   Id say its a 50-50 shot because it could go either way. He could say, since she was smart enough to put herself down as lien holder she should have known to get the rest in writing. But he could also say you should have assumed it just the same.

   The bigger and more important issue is your relationship with your mom.

   Comment by n — June 25, 2011 @ 9:03 pm

7. 

   I understand that you feel that she has no legal right. But, seriously…this is your mother, she did you a favor and helped you get a car by using her credit score, which allowed you to get to and from work and around town, then she helped you even more by paying the loan off…which only helps your credit score…which in the long run will help you get loans on your own. This is very simple. You needed help, she helped you. Now, you’re having problems with money, I understand. All she is asking you to do is pay for the vehicle for which you agreed to pay for. Believe me; you do not want your mother on your bad side. Life is short, do the right thing.

   Comment by Auto Credit Express — June 25, 2011 @ 9:03 pm

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