What happens to my car loan if my co-signer files bankruptcy?

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If you are unable to obtain auto financing on your own, a co-signer is an option to get the vehicle you desire. "What happens to my car loan if my co-signer files bankruptcy," is a question that is frequently asked, especially with our economy as a whole still in recovery mode.

This common question arises because no one wants to lose their vehicle, especially if they are making timely payments. The answer will vary, depending up your situation. If you are current with your payments, normally nothing will change; however, there have been instances where legal fees are sent to the primary signer because of the co-signer's bankruptcy. These can be disputed.

If you are delinquent or facing repossession and the bank is looking to the co-signer to make good on the loan, the debt could be included in the bankruptcy. If this happens, you may have to surrender the vehicle.

Of course, this is at the co-signer's discretion so it is extremely important to remember two things when considering a secondary signer on a loan. One, make sure that you can afford the monthly payments; and two, inquire about the co-signer's financial stability.

As long are you make your payments on time, your co-signer's bankruptcy should not affect your loan, but more importantly; you do not want to create a strain in the relationship between you and your co-signer. If you both enter into the agreement fully informed, you can avoid problems down the road should a financial crisis arise.