No good deed goes unpunished.
As a bankruptcy lawyer, no cliche rings more true.
That money you repaid to your parents they loaned you to fix your car? If you file bankruptcy, that can be a problem (and a subject for another article).
And other good acts can cause you heartache and land you in bankruptcy court.
At least once a week, someone comes into my office to tell me that they co-signed a loan for someone. Usually, it’s an ex-spouse, an ex-boyfriend, or an ex-girlfriend. Sometimes it’s a child or grandchild or niece or nephew. The reason they’re in my office is the person they co-signed for have stopped making payments. Now, the lender is knocking on their door looking for payment.
Most of the people I help are dealing with a tremendous amount of debt from various things like credit cards, medical bills, apartment leases, utilities, and other things.
These unfortunate people usually just have one debt that they need help with: the loan they co-signed for. Out of the goodness of their heart they decided to help someone. Most times it’s to help them get a car. The biggest reason they need help? They’re just not credit worthy (red flag, anyone?). Pro tip: if a professional lender doesn’t want to give your friend a loan, maybe you shouldn’t either. The co-signer asked the person sitting in my office to help them get a loan because they have good credit.
Now that caring act of assistance has landed them in bankruptcy lawyer’s office to find out what their options are.
More bad news, you have three and they’re all bad: pay the loan, file your bankruptcy, or get sued by the lender.
What I want to tell you today is that if someone asks you to co-sign a loan for them, resist the impulse. You’re not Santa Clause. You’re not obligated to endanger your own financial stability. Do something else for them. Sit down with them and review their credit report and their finances. Find out what needs to happen for them to be able to get a loan without a co-signer. Tell them to listen to a Dave Ramsey podcast. Pay the cost of their bankruptcy (after which they’ll get dozens of offers for car loans without a co-signer).
Do anything but sign your name for a contract for thousands of dollars that you’ll be on the hook for. Because I have bad news: the lender wants all of the money, not just half of it (because, hey, I am just a co-signer). The lender doesn’t care where the money comes from, and if the person you co-signed for isn’t paying, the lender is going to come after you.
If you have questions about whether or not bankruptcy might provide relief from your overwhelming debt, we hope that you’ll come in for a free consultation with an experienced Denver bankruptcy attorney. You can schedule your appointment by following this link: Schedule My Free Consultation Now.