There Is No Such Thing as a “Secondary” Borrower
When a friend or family member asks you to co-sign an auto loan, it can feel like a small favor — just your signature to help them qualify. But under the law, there is no meaningful difference between the primary borrower and the co-signer. Both parties sign the same contract, and both are equally and fully liable for the entire debt.
If the person you helped stops making payments tomorrow, the lender can come after you — immediately, completely, and without first exhausting remedies against the other borrower. Many of our clients are surprised to learn this. They believed co-signing meant they were a backup, a last resort. They were not. The moment you signed that contract, you became just as responsible for that loan as the person driving the car.
It Is on Your Credit Report Too
A co-signed auto loan appears on both credit reports. Every payment made on time helps both of you. Every missed payment hurts both of you. If the vehicle is repossessed, that repossession will appear on your credit history and remain there for seven years — regardless of whether you ever made a single payment or even knew the loan had gone delinquent.
“Co-signing is not a favor with low risk. It is a full financial obligation. If you cannot afford to make those payments yourself, do not sign.”
Voluntary Repossession Is Not a Better Option
Some borrowers believe that voluntarily surrendering a vehicle to the lender — rather than waiting for the lender to repossess it — will reduce their financial exposure. It will not. California law treats voluntary repossession and lender-initiated repossession identically.
In both cases, the lender sells the vehicle at auction, and you — along with any co-signer — are responsible for the deficiency balance: the difference between what you owed and what the vehicle sold for, plus repossession fees, storage charges, and auction costs. That balance can easily reach several thousand dollars, and lenders will pursue it.
Before You Co-Sign, Ask Yourself
- Can I afford to make every payment on this loan if the borrower defaults?
- Am I prepared for this loan to appear on my credit report for its full term?
- Do I understand I could owe thousands in deficiency and repossession fees if the car is repossessed?
- Am I aware that a missed payment will damage my credit score, not just theirs?
- Would I be comfortable signing this loan entirely in my own name?
How Bankruptcy Can Help
If you are facing repossession — or trying to prevent one — bankruptcy may be one of the most powerful tools available to you. The moment a bankruptcy petition is filed, the automatic stay goes into effect, immediately halting repossession proceedings and preventing the lender from selling the vehicle. This gives you breathing room to assess your options.
Bankruptcy can also discharge a deficiency balance after repossession, eliminating a debt that might otherwise follow you for years. Whether Chapter 7 or Chapter 13 is the right path depends on your income, assets, and goals. If you co-signed a loan that has gone south, or if you are struggling to keep up with an auto loan you can no longer afford, please call us before the lender acts.
Frequently Asked Questions
Is a co-signer equally liable on an auto loan?
Yes. There is no legal distinction between the primary borrower and a co-signer. Both parties are fully liable for the entire balance of the loan from day one. The lender may pursue either party — or both — for any unpaid amount.
Does a co-signed loan appear on my credit report?
Yes. A co-signed auto loan is reported on both the primary borrower’s and the co-signer’s credit reports. Missed payments, repossession, and deficiency judgments will all appear on both reports and can remain for seven years.
Is voluntary repossession better than a lender repossession?
No. California law treats both identically. In either case, the vehicle is sold at auction and both the borrower and co-signer remain liable for any deficiency balance, plus fees and costs.
Can bankruptcy stop a car repossession?
Yes. Filing for bankruptcy triggers an automatic stay that immediately stops repossession proceedings and prevents the lender from selling the vehicle. Call (844)894-4440 for a free consultation.
What is a deficiency balance after repossession?
A deficiency balance is the amount still owed after a repossessed vehicle is sold at auction. For example, if you owe $18,000 and the car sells for $12,000, you owe the remaining $6,000 — plus repossession fees, storage, and auction costs.