MESA – GILBERT ATTORNEY TELLS HOW YOU SHOULD CO-SIGN
Is it a good idea to co-sign on a loan for your kids?
I have many clients in my bankruptcy practice who come to me not having any other financial difficulties — no problems with their own credit cards, no problems with their car or their house — but they co-signed on a loan for their grandson, their son, their daughter, sometimes even a friend or a neighbor. And boy, does that cause problems.
When you co-sign, you become legally responsible for that debt.
Typically I see problems with car loans. Say you have co-signed for a car loan.
If the person who is driving the car, doesn’t make the payment, you can be stuck with that payment.
If that person doesn’t make the payment, your credit gets damaged. Ultimately, if that car gets repossessed or that credit card gets cut off, that causes a big black mark on your credit report.
The next thing you know, the creditor comes and sues you. They have a perfect right to do that, even if that other person files bankruptcy you can still be sued by that creditor.
And that is a big problem for lots of people.
My advice to my clients is don’t do it. Why are you co-signing on a vehicle? This is a liability issue. You never know where that is going to play out.
If you choose to or insist on co-signing, here is how I recommend you do it.
1. Have the payment made by you. Make sure you are in a position that you could make that payment in the event that they don’t.
2. Make that person accountable to you. They make a payment to you, you make a payment to the creditor.
3. Keep track of it.
That is the only way I would ever advise making a co-debtor situation even feasible or wise. Well, I can’t even say wise. It wouldn’t be wise no matter what you do.
If you must or if you feel inclined to be a co-signer, that is the only way to do it.
You make sure you can cover it, you make the payment, getting the payment from the other person. Then keep track of it.
It can really cause some damage to your credit if you don’t.
If you are not in a position to do it in that way, don’t do the transaction.
I have people on limited incomes like Social Security and they had decent credit. They were willing to co-sign on their grand children’s car.
While that is all good for the grand child, when the grand child loses his job, that causes major problems.
Now we’ve got people on fixed incomes being sued for large deficiencies of ten, fifteen, or twenty thousand dollars or more.
So, if you can, avoid it.
If you are not able to, or you just can’t resist, then do it the right way.
We can help you figure that out.
I like to help people prevent those kinds of problems, too.
If you are already that situation, we can help you there as well.
So that is one of the things we do in our practice and we would like to help you, too.
Clint W. Smith, P.C.
1423 S. Higley Rd. Suite 120
Mesa, AZ 85203