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How may a car repossession affect a cosigner?

Maryland’s laws allow creditors to repossess vehicles when borrowers’ accounts become delinquent. The Maryland Department of Labor’s website notes creditors may also repossess a vehicle if a borrower violates other terms in an agreement.

If you cosigned for a borrower on a car loan, a creditor may hold you liable for missed payments. As noted by, while you may need to pay the loan’s outstanding debt, you may not have the right to take possession of the vehicle. You may, however, work out an arrangement with the lender.

Who has liability for a repossession?

As described by Experian, creditors may collect unpaid balances from both borrowers and cosigners. Cars serve as collateral, and lenders may take them back when borrowers default. If the borrower you cosigned for failed to make payments and the lender took the car, you may incur liability for the costs of repossession.

As a cosigner, you may pay a deficiency balance. After repossessing cars, creditors auction them to make up for the loss from the loan default. If the car auctions for less than the balance owed, your lender may attempt to collect the deficiency from you. The amount may include fees related to repossessing and selling the vehicle.

What rights does a cosigner have during repossession?

Under Maryland’s consumer debt regulations and the contract’s terms, a lender must typically provide borrowers and cosigners with a Discretionary Notice no less than 10 days before repossessing a vehicle. The notice must arrive by certified or registered mail or through a personal delivery service.

After repossessing a vehicle, lenders generally have five days to send a Required Notice by certified mail. A lender typically provides a 15-day opportunity to reinstate the loan agreement after the date of repossession. Updating the account in time may avoid default and prevent damage to your credit.