My son took out a new car loan(48,000) for a friend!

[Denise0230]

My son Justin living in California took out a new car loan for a friend for $48,000. Before he picked up the car Justin and his friend found a contract on a legal website, printed and signed it, and had it notarized. The contract stated that Justin's friend would make the car payments for one year and then he would obtain his own loan for the car. Justin also holds the car insurance for the car. His friend pays him the car payments and insurance. Justin has never had the car in his possession. The year is now up and Justin has asked his friend to get his own loan for the car. His friend has not done anything about acquiring a loan and Justin doesn't know where the car is at? My question is what would be the best way to handle getting Justin's friend to take out a loan? I'm guessing this is not an issue for small claims court? What type of lawyer would Justin need to see to take care of this matter? Help

 

[adjusterjack]

Sorry, but a contract cannot be enforced if the subject of the contract is an impossibility.

There are likely two reasons that Justin's friend will find it impossible to get refinancing on the car.

1 - Bad credit - which is probably why the friend got Justin to do this.

2 - The current loan balance is probably more than the value of the car and no lender will make that kind of loan. They won't even make a loan for 100% of the value on a used car. Generally, it's 70% or 80% at best.

So, with refinancing an impossibility, no court will be able to compel the friend to refinance because it just can't be done.

The next question: Who owns the car? Who's name is on the title. If it's Justin, then all the friend is doing is renting the car from Justin.

If that's the case then Justin doesn't need a lawyer or court, he can just go get his car any time he wants to.

Oh, but wait, he doesn't know where the car is.

Is Justin beginning to realize how stupid he was to be getting into this deal which, by the way, probably includes insurance fraud because I'm guessing he never told his insurance company about the deal. Right?

Does this friend happen to be a romantic partner that he was shacking up with at the time?

 

[justalayman]

I would be cautious about Justin going to pick up the car. It's not as simple as if his name is on the title it's
His car. What is in the contract will make a huge difference as to what his legal rights are. Think of the position of a lessor of a car. In lease situations the title is in the lessors name while possession is with the lessee. The lessor has no right to simply repossess the vehicle because it is in their name. The contract rules and empowers them to act in some manner. Depending what is in the contract, it might be interpreted as a lessor/lessee relationship which would seriously restrict Justin's rights to act.

He needs to have an attorney review the contract. A general practice civil law attorney would be the type of attorney sought.

Justin may require a courts ruling to be able to repossess the vehicle. If so and he simply takes it without such an order he could cause himself a lot of headaches.

As to enforcing the contract: again i disagree with adjusterjack. He can seek the enforcement of the contract. If the friend cannot source his own loan, the courts can order alternate resolutions. Without knowing what is in the contract I cannot even suggest what any may be but there are most likely some available.

 

[Denise0230]

My son took out a car loan for a friend.

Thanks for the answers I received so far. In response to the answers Justin doesn't want the car and can't afford this car. Yes he signed for the loan because his friend had bad credit. The friend was going to make some very hefty payments on the car to get it paid down. Of course that never happened. I guess he will have to look into getting a general practice civil attorney. Will Justin be able to have the courts get his friend pay the court costs and legal fees? So is there any way for Justin to get out of this? Thanks for any ideas that anyone might have. Justin's name is on the title. It was not a romantic partner it was a friend of his. Yes he realizes how stupid he was. Too late now. His insurance agent knew what Justin was doing.
Could Justin try to get someone to take over the remainder of the loan?

 

[adjusterjack]

Thanks for the answers I received so far. In response to the answers Justin doesn't want the car and can't afford this car. Yes he signed for the loan because his friend had bad credit.

It's unfortunate that people don't understand that when a bank won't lend money to somebody there's a good reason for it.

Will Justin be able to have the courts get his friend pay the court costs and legal fees?

If he wins he will be awarded his filing and process service fees but, in our country, the parties to a lawsuit are responsible for paying their own lawyers unless there is a bilateral attorney fee provision in the contract.

Is there one?

So is there any way for Justin to get out of this?

He'll need to have the contract reviewed by an attorney to see if he does have the option of just going to get the car. If he has to go to court, about the only thing I can see happening is Justin getting the car back.

If he doesn't want it and can't afford it, he'll have to sell. It's almost a guarantee that the sale price won't cover the loan balance so he will have to put up his own money (or yours) to cover the difference.

Another option is for Justin to just default on the loan but that would screw up his own credit and likely get him sued for the deficiency after the car is repossessed and sold.

Unfortunately, if the friend is still making the payments as agreed, that could get him sued by the friend.

Justin's name is on the title. It was not a romantic partner it was a friend of his. Yes he realizes how stupid he was. Too late now. His insurance agent knew what Justin was doing.
Could Justin try to get someone to take over the remainder of the loan?

He could certainly try but isn't likely to succeed. It would still be a bad deal for anybody to get into so I doubt he'd find anybody foolish enough to do it. Besides, that wouldn't relieve him of his contractual loan obligations as the lender isn't likely to allow the reassignment of the loan to another person nor will he be able to transfer the title so he'd still be on the hook for anything that happened to the car. And what possible financial incentive would anybody have for taking over the loan unless Justin paid somebody a premium to do it.

I think the best thing Justin can do is get the car back if he can, make up the difference between the sale price and the loan balance, and get out from under it that way, learning an expensive life lesson from the school of hard knocks.