In a situation that is unfortunate but quite common, our client contacted us after he was served with a lawsuit by Credit Acceptance Corporation for an old repossessed car. He informed us that he had co-signed on the vehicle for his ex-girlfriend and that they had broken up shortly thereafter. She took the car into her possession and our client never actually stepped foot inside of it. She eventually defaulted on the payments and the car was repossessed and eventually sold at auction. This is a common occurrence that happens again and again in the New York and New Jersey area. Credit Acceptance, Corp. which is a debt buyer acquired the debt from Kings Auto Show for pennies on the dollar and decided that they would try to obtain a default judgment against the owners of the car for over $16,000.
Credit Acceptance hired the New Jersey collection law firm of Lyons, Doughty and Veldhuis, P.C., a firm we defend clients against in New Jersey quite often. Lyons Doughty were unable to locate the ex-girlfriend in the matter so they decided to pursue our client instead for the deficiency amount of over $16,000. Unfortunately, cosigning on a car loan or any other loan means that you are just as liable as your co-signer is which is something that consumers are not aware of for the most part. Our client was in his mid-twenties when he co-signed on this loan and though he was doing a favor for his girlfriend at the time.
We submitted our answer with affirmative defenses to protect our client against a default judgment. Lyons Doughty quickly contacted our office to negotiate a settlement in this case as they knew that we would push this case towards trial and they would have a difficult burden proving that Credit Acceptance Corporation could link our client to this alleged debt. The case was settled for $4,000, a discount of over 75% off of the original amount. This was a fantastic settlement and it avoided a default judgment as well as garnishment or a bank levy. However, it points to the fact of how careful consumers must be when they are asked to co-sign on a loan.