A repossession occurs when the lender assumes ownership of a vehicle from the borrower due to the borrower's breach of the car loan agreement. Often this breach is in the form of missed payments on the loan. Repossessions can be voluntary, where the borrower returns the car to the lender, or involuntary, where the lender sends a tow truck to retrieve the car from the borrower. Both types are reported as a repossession on your credit report, where it can remain for up to seven years.
A co-signer is jointly obligated for the debt signed for. As a co-signer, you agreed to be personally liable for the payment of the debt in case the primary borrower did not make the payments; therefore, you can sue neither the primary borrower nor the lender for the repossession of the vehicle. The lender has the right to repossess if the terms of the car loan agreement are not met either by the primary borrower or by you.
A repossession does not relieve you of your obligation for the car debt. According to the Federal Trade Commission, once the lender repossesses the car, it may decide to sell the auto to recover some of the money owed on it. The difference between what the car sells for and the amount still owed on the loan is called deficiency. As a co-signer, both you and the primary borrower are liable for payment of this amount; however, according to the Federal Trade Commission, the lender must sell the car in a commercially reasonable manner. This means the selling price of the car must be in keeping with the fair market value of other such cars in your area. If the lender sells the car at a price below fair market value, this may give you a claim against the lender for damages or serve as a defense against a deficiency judgment.
Depending on the dollar amount, the lender may decide to sue you and the primary borrower in civil court for the deficiency if you don't pay it. If the court grants a judgment, the lender may be able to aggressively pursue collection of that judgment, which could include garnishment of your wages, seizure of the funds in your bank accounts and the placement of a lien on your personal property, depending on the laws of your state. A judgment appears on your credit report for up to seven years as a public record.