When you ask a friend or family member to co-sign with you on an agreement, it typically means that the person promises to pay the other's debts in the event that the consumer fails to do so. People can co-sign on all sorts of loans, including car payments or other large-item purchases. Co-signing means that both parties have the responsibility to pay any debts that arise.
Co-signing usually implies a joint or joint-and-several obligation to pay a debt. If the co-signer fails to pay the debt, then the other signer will need to cover the costs. In a joint co-signing arrangement, the co-signing is for guaranty. This keeps the lender at bay as they know that they will not lose money if they have two parties involved, in a joint-and-several co-signing arrangement is one where the co-signer becomes a co-debtor. This means that he or she is almost guaranteed to pay some of the debt on a loan.
In the sad event that the consumer who is taking out a loan passes away, the debt on that expense will transfer to the co-signer automatically, rather than being distributed through debt or satisfied with the decedent's estate. Many realtors and landlords require that all college students have a co-signer, or that people who have bad credit obtain a co-signer as assort of insurance. As well, some companies require that people who have an uncertain income may need to obtain a co-signer. Those who are applying for mortgages, money loans, and motor vehicle purchases may also need a co-signer.
According to the United States law codes in most states, it is mandatory that any co-signing agreement be written out in detail and enforced in a court of law. The legal act or co-signing is called a guaranty and as a result the co-signer is referred to as a guarantor of a contract. A co-signer is also referred to as the surety. Co-signing is considered a promissory note and typically entails a financial risk for the co-signer or guarantor. Co-makers are in a similar position to guarantors but co-sign checks and other drafts instead.
If you have been asked to co-sign a loan, then you need to make sure you understand what is included in this responsibility. You are pledging that you will pay on the loan if the borrower defaults for any reason. Typically, co-signing with a loved one can help him or her to build credit. While the arrangement can be satisfactory, if the person that you signed with misses a payment, then a creditor can come after you because you agreed that you would be partially responsible for the loan. You will want to seriously consider whether or not you trust the borrower and believe that he or she will fulfill the responsibility to pay debts.
If the debtor fails to pay the expenses he was supposed to, and as a result you are saddled with the debt, you may be able to avoid payment in certain bankruptcies. You will want to hire a bankruptcy lawyer if your debtor files for bankruptcy and passes the expenses of the debt onto you. In most cases, when a debtor files for a Chapter 7 bankruptcy, creditors are still able to proceed with collection efforts against guarantors even if the freeze on creditor harassment is in place. If your debtor files a Chapter 13 bankruptcy, this may affect your responsibilities as the guarantor.
If the debt is a consumer debt and can't be incurred in the ordinary course of business, you may be able to avoid having to pay for the debt. You will also need to prove that you can't benefit from the proceeds of the debt and that make sure that the debtor sticks to the arranged payment agreement. If the debtor does not adhere to the guidelines of the payment plan then creditors have a right to go after you as the co-signer.
If you want more information about this situation or if you are being pursued and want to defend yourself, it may be best to hire a local bankruptcy lawyer to assist you. With the right attorney on your side, you may be able to save thousands of dollars by avoiding the debts that you were originally expected to pay. Discuss your situation with an attorney today to learn more about the implications of co-signing agreements and learn more about how you can avoid payments if you are saddled with the debts.