Vehicle repossession and IRS

by Kameron
(Tehachapi, California, USA )

Hello, in 2007 I co-signed for what now is an ex girlfriend (stupid move) and shortly after a brutal break up she allowed the vehicle which was in her possession to be repossessed. I was not aware that it was up for repossession until after the fact due to I resided with her at the the time of co-sign and I changed my number because of immature/threatening phone calls from my ex.

Anyhow, now over four years later I have a wife and a daughter and today my wife gets a phone call from a collector for the repossessed car telling her that we will be handed over to the IRS in order to collect on the balance from our tax return.

I understand that I had signed a legally binding contract but when I spoke with a representative of the collection agency they told me I was liable for the full balance due to the fact my ex is on welfare (because she doesn't want to get off her a$$).

This infuriated me because the one who is trying to make something of myself and not draining our economy is now liable for the full debt. I don't believe that it is fair. We both signed the contract therefore I believe we should both be held accountable for the debt. So my question is...... Can this collection agency forward my debt with them to the IRS in order to obtain for there loss? Thank you very much for your help.

Reply from


When you cosigned for the vehicle, you agree to be 100% responsible for the loan. And in most states, there is no requirement that a lender notify the cosigner before they repossess the vehicle. (We aren't experts on every state's repo laws, so please don't take that as legal advice.)

That's the bad news.

On the other hand, the statute of limitations for most consumer debts in California is four years. Furthermore, we don't know what the debt collector is trying to say by threatening to "turn you over the IRS." The IRS does not collect debts on behalf of private debt collectors. There are cases where income tax returns can be intercepted to pay debts, but that usually involves federally guaranteed loans like student loans.

So this debt collector's threats may be illegal, and it may be too late.

We would really encourage you to get a free consultation with a consumer law attorney as soon as possible.

Comments for Vehicle repossession and IRS

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Mar 08, 2012
by: Anonymous

Ok. Thank you. I did realize that I would be responsible but, I had figured that since my ex's name was also on this contract that she would be responsible for at least half of the balance due as well. Thank you for your help. It's greatly appreciated. It's too bad that I have too much pride to live off the government and have to pay for things that others don't. I hate how a system that was designed to help people in need has turned into a lifestyle.

Reply from

We are glad you found this information helpful and hope you are able to put this behind you.

Apr 10, 2015
They do report to the IRS
by: Anonymous

When you default on a secured debt like a car or house. The owner of the debt takes the property back like for a instance a car that you owe 10000 dollars on. They sell the car at auction for 5000 leaving a balance of 5000 that they cannot collect on. Basically the IRS considers that income for you. You just made 5000 dollars free and clear. The owner of the dept sends you a 1099 for 5000 dollars. and the IRS gets a copy. You now owe the IRS tax on 5000 dollars. The owner doesn't get any of that.

Also threatening that is illegal since as in your case in can be used to intimidate the debtor.

Reply from

We agree about the possible tax implications but just because they charge it off or send you a 1099-C doesn't necessarily mean they can no longer collect.

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