I cosigned for a friend who is not paying the payment

Question

I cosigned for a loan for a friend. He has now moved away and is not making payments. I have been asked to pay--they even called my job--and I need to keep my credit. The payments are too high for me to manage. If I pay off the loan to keep my credit can I take him to small claims court to get my money back?

It doesn't really help you now, but if the bank doesn't trust the friend to pay the loan on schedule, to the point of requiring a co-signer, you really have to ask yourself: "why should I trust that they will pay on schedule?". — user, Jun 19 '16 at 19:11
What was purchased with the loan: car, house, new roof, giraffe? — MonkeyZeus, Jun 20 '16 at 12:24
It's not possible to help on this QA, Leslie, unless you state the approximate amount and what the item in question was. — Fattie, Jun 20 '16 at 12:30
Your last question is "should I sue someone who has no money and does not pay what he owes?" Suppose you do and your suit is successful. Where do you suppose the money is going to come from? Your "friend" is playing a game where you try to collect a loan and he tries to not pay it; how good do you think he is at the debtor end of that game compared to how good you are at the creditor end? Evidence so far is that's he's pretty good at this game. — Eric Lippert, Jun 20 '16 at 13:37
I also co-signed a loan for someone, a friend's student loan, and they also have gone AWOL on it, leaving me with the payment. I regret it severely. Let this be a cautionary tale for people: don't co-sign loans! — ognockocaten, Jun 20 '16 at 14:35
Related: Should you co-sign a personal loan for a friend/family member? Why/why not? — Ben Miller, Jun 20 '16 at 14:46
@JoeBlow - Exactly. Lawyer up has gotten 40+ votes and this could be a 2k loan? The advice isn't the problem it is the voting. — blankip, Jun 20 '16 at 18:11
Too high to manage? Is this a car loan? Or a real estate loan? If there is collateral somewhere that can be repossessed, do not pay a single cent until that that property is repossessed. Collection agencies tend to go after the easiest targets. Same goes if you can track down that person and find out if he has a job that they can garnish. Also, if it's a student loan, see that he can not get a copy of his degree, or a copy of his transcript, even if you do manage to pay off that loan. As to Small Claims court, it will depend on the amount in question and the jurisdiction you're in. — Stephan Branczyk, Jun 20 '16 at 18:43
Also, you need to learn your rights about debt collection, and when they can, or can not call your job, and what they're allowed to say, or ask for. So assuming you're in the United States, you need to read these articles from the Federal Trade Commission: https://www.consumer.ftc.gov/topics/dealing-debt (Also, do not assume that the debt isn't being paid off by the other person. I know someone that was scammed by paying a supposed electrical bill that her tenant had been paying all along, but since the tenant was out on vacation at the time, the timing of the scam was exactly right) — Stephan Branczyk, Jun 20 '16 at 18:55
@MichaelKjörling You're right but people can give you a lot of social pressure to do this. I've been in that situation. I have to sympathize with him. — Hack-R, Jun 20 '16 at 22:33
@Hack-R I prefer to known I can sleep well in the next 20 years over dreaming when I will be bankrupt than "social pressure". I was recently asked to cosign a house and I simply told I whould not do it even for family. Cosign is just a way to put two families in problems. I am a 40 years-old guy and do not give a single thought to "social pressure". My sister once borrowed 20k from me to buy a better car - however I would not ever cosign anything - e.g I would not cosign anything, it just like giving a black check to a greasy vendor to my bank account. — Rui F Ribeiro, Jun 21 '16 at 05:26
Adults should know better cosigning is not something to ask to other family so lightly. And honestly, [expletive] "social pressure". We are not in college anymore. And if family tries to "social pressure" me I would tell them to get lost. It is very unwise to do this kind of thing between family, as it will steal from you the capacity to aid them financially should ruin hit them. And in fact, we have laws that forbid in certain situations brothers co-signing, If I am not wrong. — Rui F Ribeiro, Jun 21 '16 at 05:32
I agree with asking about this sort of situation on [law.se]—at least in the UK, there are situations in which a guarantee can be set aside (eg if your "friend" made misrepresentations to you that were fundamental to your entering into the agreement), or rendered unenforceable (eg if there was undue influence by the bank to pressure you into providing the guarantee: this can sometimes be the case if they simply did not ensure you had received impartial legal advice prior to entering the agreement). — eggyal, Jun 21 '16 at 10:12
it's unfortunate that so many folks have made so much effort on this page - but the OP has just disappeared and offered no further information. — Fattie, Jun 21 '16 at 12:29
If you find no way out, perhaps negotiate? "The payments are too high for me to manage." implies to me that since you can't make the payments either, the bank is going to lose too. Perhaps you and the bank can negotiate a reduce pay-back. If you offer to pay back 50-90% of the outstanding balance, will they instead fight for every penny? — chux - Reinstate Monica, Jun 21 '16 at 18:35
-1 to the question for omitting all the information (most importantly, the amount of the loan) necessary to answer it well. As written it's turned into a circus of conflicting answers to various other individually interesting questions that don't admit a unified answer, and if one answer ever gets accepted it's just going to be whoever guessed/read OP's mind best. — R.. GitHub STOP HELPING ICE, Jun 21 '16 at 20:13
For everyone who is itnerested: http://law.stackexchange.com/q/11117/1272 — Zaibis, Jun 22 '16 at 12:28
@JoeBlow the irony of someone posting to complain of a friend bailing on them, and then bailing the topic themselves. Methinks they and their "friend" have something in common. — , Jun 22 '16 at 16:38
After the fact not as helpful, but for future reference I find Dave Ramsey's advice on the subject to be very good: Basically, if you want to remain friends, don't do it, ever http://www.daveramsey.com/blog/say-no-to-cosigning/ — StormeHawke, Jun 22 '16 at 19:27
Don't do it unless you have the money to take over the loan and would trust them to return a gift of that amount. Or do it under acontractn explicit which gives you the same protections as a lender. Lawyer up first. — keshlam, Jun 22 '16 at 23:03
There are only two possibilities you should ever consider when friends ask for a loan. The first is to say no, the second is to give them the money with no expectation of return. Anything else is asking for trouble. — , Jun 23 '16 at 11:35
If you cosign with someone, what does this mean? (1) The bank does not consider the loan with the other person to be secure. (2) You are willing to loan all the money to the other person. (3) You are willing to pay off the entire loan -- in other words, forgive this other person's debt to you per the second point. (4) This should be the expected worse case scenario -- and you should expect it. — Noctis Skytower, Jun 23 '16 at 16:29
I am surprised that the bank accepted the OP as a co-signer if they can't actually afford the payment. But maybe the OP just meant they can't comfortably afford the payment without compromising their existing lifestyle. (Of course since the OP is AWOL we'll never know). — stannius, Jun 24 '16 at 19:22
@keshlam, even if you have the money to pay off the loan, you may not find out you need to pay it off until collections comes knocking, at which point you have already taken a hit on your credit report. — Shannon Severance, Jun 27 '16 at 18:21

score 132 · Answer 1 · edited Jun 20 '16 at 00:06

132

Cosigning is explicitly a promise that you will make the payments if the primary signer can not. Don't do it unless you are able to handle the cost and trust the other party will "make you whole" when they can... which means don't do it for anyone you would not lend your money to, since it comes out to about the same level of risk.

Having agreed, you're sorta stuck with your ex-friend's problem.

I recommend talking to a lawyer about the safest way get out of this. It isn't clear you can even sue the ex-friend at this point.

edited Jun 20 '16 at 00:06

BrenBarn

23,964
6
60
80

answered Jun 19 '16 at 18:34

keshlam

45,770
6
77
152

67

I'd say "don't cosign for anyone you would not feel confortable giving out the money". http://www.bankrate.com/finance/debt/reasons-not-to-co-sign-loan.aspx – Mindwin Remember Monica Jun 20 '16 at 13:11
My parents were cosigners for a friend of theirs when I was young, and this happened to them. Luckily, the person they cosigned for had some property stored in our attic at the time. They were able to go to court and get a claim on the property stored there, which they sold to put toward paying the debt. – Bradley Uffner Jun 20 '16 at 14:26
19

While this advice could be right - it also could be really really bad. Start talking to a lawyer about a 2k loan and then get the lawyers 3k bill... I think you should delete this or say do this if the loan is over 100k or something. But lawyering up sounds safe and right but hardly ever works out that way. – blankip Jun 20 '16 at 18:22
28

@blankip - there are plenty of lawyers who will discuss options without charging, and even when they do charge you can tell them how much budget you have and then they will restrict the services they offer to those you can afford. – Jules Jun 20 '16 at 18:39
1

@Jules - if you find a lawyer that talks to you about this for longer than 5 mins and doesn't charge you then you probably don't have a good lawyer or you have found a good friend. Someone calling law offices for something like this would be weeded out by the legal assistants at a good firm - you would never talk to a lawyer unless it was a substantial amount of money or it was a funny story. – blankip Jun 20 '16 at 18:49
@blankip Good point. I was once able to get a free contract law consultation with a pair of high-priced lawyers, that lasted the better part of an hour. Somehow I doubt that would have happened if one of them hadn't been married to my aunt. – Mason Wheeler Jun 20 '16 at 18:55
7

@MasonWheeler - the real scenario is the type of lawyer that probably would be contacted for this person (bankruptcy/debt/student loan law ads) is the exact type that would do a 15-29 min consultation then schedule for an appointment, you sending in docs, proof, and so on. This is the weaselly guy that will nickel and dime you for the next 2 months for the 10k loan. At first he will tell you that for a couple hours he might be able to wipe it out... Then 15 billable hours later you are on a payment plan for the 10k. Seen it 100 times. – blankip Jun 20 '16 at 19:21
2

@blankip Perhaps things are different where you are, but back in the '90s I used to specialise in developing web sites for lawyers, and every single one of my clients offered a free 15 or 30 minute consultation. And these were large & reputable firms, well known in the area. – Jules Jun 20 '16 at 20:44
5

@Jules - it just depends. If it can be filed in small claims the legal assistant will just tell you that - and that is the best advice. If it is a little over that amount they might have a very brief chat. Really though the advice this person gets from here or legal stack would be as good or better than a lawyer. At least the people here are a bit unbiased. The lawyer is looking to make money. They don't make money by telling people they don't need legal counsel. – blankip Jun 20 '16 at 21:21
2

Worth noting: this OP stated that the payments were too much to manage. In such a scenario, taking risks, such as the risk one must take in finding a reputable lawyer who wont weasel you out your money, becomes part of the nature of the beast. – Cort Ammon Jun 21 '16 at 22:43
1

This depends on the contract, and so on the state where you are in France there are two (at least) differents contracts, one will make you pay if the other don't and there is nothing you can do about it, one not. My guess is that the op should indicate where he lives and asked on law.SE http://law.stackexchange.com/ – Walfrat Jun 22 '16 at 07:11
1

Actually cosigning is more risk than just lending or gifting the money directly. You are fully liable for the payments, but the lender is under zero obligation to inform you if the primary borrower stops paying and late fees start piling up. If you lend directly you risk the money and the relationship; if you co-sign you risk those plus your own credit rating and even more money for late fees and other penalties. – stannius Jun 24 '16 at 19:19

enderland · Answer 2 · 2016-06-20T11:10:39.220

90

I'm sorry you are going through this, but what you are dealing with is exactly is how cosigning works. It is among other reasons why you should never cosign a loan for someone unless you are 100% prepared to pay the loan on their behalf.

Unfortunately, the main "benefit" to cosigning a loan is to the bank - they don't care who makes payments, only that someone does. It is not in their interest to educate purchasers who can easily get themselves into the situation you are in.

What your options are depends a fair bit on the type of loan it is. The biggest problem is that normally as cosigner you cannot force your friend to do anything. If it is for a car, your best bet is to convince them to sell the car and hopefully recoup more than the cost of the loan.

Many workplaces have some sort of free service to provide counseling/guidance on this sort of thing. Look into your employee benefits as you may have some free services there.

You can sue your friend in small claims court, but keep in mind:

The entire point of cosigning is to make the situation you are talking about come true
If your friend cannot pay because he has no money, suing them will likely do nothing
- You may be able to force the friend to sell an asset (if it is cosigned)
If your friend has money and just isn't paying, they are trashing their credit
- Document your communication with the friend if you go this route

It also depends on how big the loan is relative to your income. While it might feel good to sue your friend in small claims court, if it's for $500 it probably isn't worthwhile - but if your friend just stopped paying off their $30k vehicle assuming you will pay for it, even though they can pay for it themselves?

edited Jun 20 '16 at 11:10

answered Jun 20 '16 at 01:43

enderland

4,186
2
20
41

6

"It is among other reasons why you should never cosign a loan for someone unless you are 100% prepared to pay the loan on their behalf." - Shouldn't that be "It is among other reasons why you should never cosign a loan for someone". Full stop. If the bank won't lend to someone, neither will I. – PeteCon Jun 20 '16 at 15:35
17

@Pete there are situations you may want to do this. But you should always be prepared to pay for the full amount in those situations. – enderland Jun 20 '16 at 15:38
11

Many smart people use the rule "never co-sign a loan for anyone who doesn't carry your genes, and even then, assume you'll have to pay sooner or later." A huge percentage of the time, co-signing turns out to be a gift. – Jeffiekins Jun 20 '16 at 17:59
10

I learned: Never cosign or guarantee for a loan. If you can afford to and are willing to give the person the money, give it to them. If you cannot afford it or you are not willing to give them the money, then don't. I hope that makes the decision easier. – gnasher729 Jun 20 '16 at 20:16
1

Co-signing is a very bad idea even, or especially between family. It might be an option to teach a teenager responsibility e.g. my father cosigned for me to buy my first computer while he could had paid it full, and I would pay it the instalments to him, simply because he could afford it, otherwise, you will just put in jeopardy yourself besides the family member if anything goes wrong. Think well over it, cosigning is just a way for the bank to weasel out the legal system and bleed a victim over the amount due by someone else. – Rui F Ribeiro Jun 21 '16 at 06:51
7

"If your friend cannot pay because he has no money, suing them will likely do nothing" -- there's different kinds of "no money", though. There's "no money" meaning "aw, it's not really convenient for me to pay right now, cut me some slack" and there's "no money" meaning, "I file for personal bankruptcy and sell everything I own". Suing is what distinguishes those two cases when the debtor isn't co-operating, and co-signing is what transfers the hassle of suing from the bank to you. – Steve Jessop Jun 21 '16 at 08:05
1

There are cases where cosigning is reasonable. For example, if you've just moved to a new country, the banks there won't trust you until you have at least a few months proof of income, but that doesn't mean you are untrustworthy. – Benubird Jun 21 '16 at 12:55
@Jeff Do you have some numbers behind your "huge percentage?" I'd be interested to know that stat. – Michael come lately Jun 22 '16 at 01:37
1

@Michael 2 different acquaintances in banking told me that "most of the time, when we require a cosigner, the cosigner end up having to pay." Considering that most cosigners probably think the possibility is remote, that seems like a huge percentage to me. – Jeffiekins Jun 23 '16 at 18:38
1

@Jeff That's in line with this Atlantic article: "According to the FTC, depending on the type of the loan, as many as three out of four primary borrowers default on their obligations, leaving the cosigner to pay." I can't, however, seem to find canonical numbers. – Michael come lately Jun 23 '16 at 21:35

score 55 · Answer 3 · answered Jun 20 '16 at 17:51

I am not sure how anyone is answering this unless they know what the loan was for. For instance if it is for a house you can put a lien on the house. If it is for the car in most states you can take over ownership of it. Point being is that you need to go after the asset.

If there is no asset you need to go after you "friend". Again we need more specifics to determine the best course of action which could range from you suing and garnishing wages from your friend to going to small claims court. Part of this process is also getting a hold of the lending institution. By letting them know what is going on they may be able to help you - they are good at tracking people down for free.

Also the lender may be able to give you options. For example if it is for a car a bank may help you clear this out if you get the car back plus penalty. If a car is not in the red on the loan and it is in good condition the bank turns a profit on the default. If they can recover it for free they will be willing to work with you. I worked in repo when younger and on more than a few occasions we had the cosigner helping. It went down like this... Co-signer gets pissed like you and calls bank, bank works out a plan and tells cosigner to default, cosigner defaults, banks gives cosigner rights to repo vehicle, cosigner helps or actually repos vehicle, bank gets car back, bank inspects car, bank asks cosigner for X amount (sometimes nothing but not usually), cosigner pays X, bank does not hit cosigners credit, bank releases loan and sells car. I am writing this like it is easy but it really requires that asset is still in good condition, that cosigner can get to the asset, and that the "friend" still is around and trusts cosigner. I have seen more than a few cosigners promise to deliver and come up short and couple conspiring with the "friend".

I basically think most of the advice you have gotten so far is crap and you haven't provided enough info to give perfect advice. Seeking a lawyer is a joke. Going after a fleeing party could eat up 40-50 billable hours. It isn't like you are suing a business or something. The lawyer could cost as much as repaying the loan - and most lawyers will act like it is a snap of their fingers until they have bled you dry - just really unsound advice.

For the most part I would suggest talking to the bank and defaulting but again need 100% of the details.

The other part is cosigning the loan. Why the hell would you cosign a loan for a friend? Most parents won't cosign a loan for their own kids. And if you are cosigning a loan, you write up a simple contract and make the non-payment penalties extremely costly for your friend. I have seen simple contracts that include 30% interests rates that were upheld by courts.

This is pretty much the only way out that I see it (hopefully it was for a home, since he can't have taken that with him when he moved). In this case you can try to scrape together payments somehow until you can sell the house, and you may not be out too horribly much money in the end. — T.E.D., Jun 20 '16 at 20:38

score 20 · Answer 4 · answered Jun 20 '16 at 10:48

20

The point of co-signing for a friend is that they're your friend. You signed for them in the belief that your friendship would ensure they didn't burn you. If your friend has hung you out to dry, basically they aren't your friend any more.

Before you lawyer up, how's about talking to your friend as a friend? Sure he may have moved away from the area, but Facebook is still a thing, right? It's possible he doesn't even realise you're taking the fall for him.

And presumably you have mutual friends too. If he's blanking you then he does know you're taking the fall and doesn't care. So call/message them too and let them know the situation. Chances are he doesn't want all his other friends cutting him off because they can see he'd treat them the same way he's treating you. And chances are they'll give you his number and new address, because they don't want to be in the middle.

If this fails, look at the loan. If it's a loan secured against something of his (e.g. a car), let it go. The bank will repossess it, and that's job done. Of course it will look bad on your credit for a while, but you're basically stuck with that.

answered Jun 20 '16 at 10:48

Graham

2,402
14
14

18

I'm sorry, but co-signing goes way way beyond "friend". I know people who wouldn't do this for their own kids. – T.E.D. Jun 20 '16 at 20:34
5

"Sure he may have moved away from the area, but Facebook is still a thing, right?" Telephones are still a thing, right? (Or video calls.) Something like this surely needs the back-and-forth of a proper conversation. Or am I showing my age? – T.J. Crowder Jun 21 '16 at 05:23
4

@T.J.Crowder if you use Facebook you'll have written, verifiable evidence you spoke to that person and what you spoke about, unless you recorded the telephone call. Might be useful if it does ever get legal. – Dan Jun 21 '16 at 08:58
1

@T.J.Crowder Sure, phones are a thing. :) But if they've moved away then you might not have their new landline number, and perhaps they've changed their mobile number too. But you won't have lost them off Facebook. I'm not so much thinking about using Facebook as the primary means of communication (per Dan's comment), more about it being a way of initially reaching out to establish communications. – Graham Jun 21 '16 at 10:17
I'm with @T.E.D. . My parents told me they would never ever cosign for me. They're willing to help me out if I get myself in a pinch, but they would never cosign for me. – Dan Jun 21 '16 at 16:01
4

@Dan Fair enough, but the OP has co-signed for this person. That presumably means he was a close enough friend to think he could be trusted. I do agree with you and TED, but the "should I co-sign?" horse has not just left the barn but is lying in a ditch half a country away with all four legs in the air. Neither closing the door nor flogging its dead corpse are much use to the OP at this point. ;) – Graham Jun 21 '16 at 16:37
@Graham I am 100% with you. I think the horse may have been launched into space as a test animal at this point. But I do think it is worth mentioning how serious cosigning really is for any posterity that may view this. My sympathies to OP, of course, on the loss of the horse. – Dan Jun 21 '16 at 17:04
@Dan Just to further your point for posterity. Banks spend tons of money on hiring really smart people who are constantly improving their algorithms for determining whether someone will pay back a loan successfully. They are really good at it. If they say they don't think the person's capable of paying back the loan, you should probably listen to them. – Kevin Jun 23 '16 at 14:09
@DanPantry: Seems to me a recorded call is a lot harder to fake. Is a screenshot of Facebook really admissible evidence in court? I can whip up a pixel-perfect fake one in minutes; any defence lawyer should be able to call on some expert to testify to this. You'd have to subpoena FB itself to prove the communication to any degree of certainty. – Lightness Races in Orbit Jun 23 '16 at 16:57
@LightnessRacesinOrbit I would imagine you could demonstrate retrieval of the message directly from FB's servers on your computer. Live in the courtroom, even. But you're right, screenshots would be very easy to fake. – Dan Jun 23 '16 at 17:24
1

@Dan: Hmm maybe. Risky though because you're relying on FB letting you maintain access to old messages to potentially-now-blocked contacts! It currently does (IIRC) but I wouldn't rely on that for legal purposes. And then there are proxies, MITM attacks, all sorts of ways you could still fake it. But probably going beyond the reasonable doubt barrier a little now. – Lightness Races in Orbit Jun 23 '16 at 17:28
@LightnessRacesinOrbit I have no idea how this actually works in court, but you COULD technically just do it on the Judge's cell phone :P I doubt that sort of shenanigans is allowed in court. But you got me thinking. – Dan Jun 23 '16 at 17:30
@Dan: You'd still have to prove that the target of the message was definitely the defendant! And that the defendant was in control of the account at the time the conversation took place. – Lightness Races in Orbit Jun 23 '16 at 17:50
@LightnessRacesinOrbit in some countries, a phone call recording being recorded without other party knowing of its existence will not hold up in court. And the tone of the conversation might be quite different if yous aid "BTW i'm recording this now lol" – Dan Jun 24 '16 at 07:15
Guys, maybe take this to talk instead of comments? – Graham Jun 24 '16 at 10:25
@DanPantry: That's true. – Lightness Races in Orbit Jun 24 '16 at 10:53
@Graham: It's "chat" and we're providing critique on the answer. – Lightness Races in Orbit Jun 24 '16 at 10:53
@LightnessRacesinOrbit Actually you're providing critique on a comment which is unrelated to the answer. Just saying. – Graham Jun 24 '16 at 11:48
@Graham: I disagree. The answer recommends using Facebook. We're talking about that. – Lightness Races in Orbit Jun 24 '16 at 14:05

Harper - Reinstate Monica · Answer 5 · 2016-06-27T20:55:25.737

This is what cosigning means.

You promised to pay the loan if he didn't. That was a commitment, and I recommend "owning" your choice and following it through to its conclusion, even if you never do that again.

TLDR: You made a mistake: own it, keep your word, and embrace the lesson.

Why? Because you keep your promises. (Nevermind that this is a rare time where your answer will be directly recorded, in your credit report.)

This isn't moralism. I see this as a "defining moment" in a long game: 10 years down the road I'd like you to be wise, confident and unafraid in financial matters, with a healthy (if distant) relationship with our somewhat corrupt financial system. I know austerity stinks, but having a strong financial life will bring you a lot more money in the long run.

There may be more to the story

Many are leaping to the conclusions that this is an "EX-friend" who did this deliberately. Don't assume this.

For instance, it's quite possible your friend sold the (car?) at a dealer, who failed to pay off this note, or did and the lender botched the paperwork. And when the collector called, he told them that, thinking the collector would fix it, which they don't do.

The point is, you don't know: your friend may be an innocent party here.

Time is a factor

Creditors generally don't report late payments to the credit bureaus until they're 30 days late. But as a co-signer, you're in a bad spot: you're liable for the payments, but they don't send you a bill. So when you hear about it, it's already nearly 30 days late. You don't get any extra grace period as a co-signer.

So you need to make a payment right away to keep that from going 30 late, or if it's already 30 late, to keep it from going any later.

If it is later determined that it was not necessary for you to make those payments, the lender should give them back to you. A less reputable lender may resist, and you may have to threaten small claims court, which is a great expense to them. Cheaper to pay you.

Friendship matters too!

They say France is the nation of love. They say America is the nation of commerce. So it's not surprising that here, people are quick to burn a lasting friendship over a temporary financial issue. Just saying, that isn't necessarily the right answer.

I don't know about you, but my friends all have warts. Nobody's perfect. Financial issues are just another kind of wart. And financial life in America is hard, because we let commerce run amok. And because our obsession with it makes it a "loaded" issue and thus hard to talk about. Perhaps your friend is in trouble but the actual villain is a predatory lender.

Point is, the friendship may be more important than this temporary adversity. The right answer may be to come together and figure out how to make it work.

Yes, it's also possible he's a human leech who hops from person to person, charming them into cosigning for him. But to assume that right out of the gate is a bit silly.

Talk to the lender

The first question I'd ask is "where's the car?" (If it's a car). Many lenders, especially those who loan to poor credit risks, put trackers in the car. They can tell you where it is, or at least, where it was last seen when the tracker stopped working. If that is a car dealer's lot, for instance, that would be very informative.

Simply reaching out to the lender may get things moving, if there's just a paperwork issue behind this.

This is a life lesson. Make the most of it.

Many people deal with life troubles by fleeing: they dread picking up the phone, they fearfully throw summons in the trash. This is a terrifying and miserable way to deal with such a situation. They learn nothing, and it's pure suffering.

I prefer and recommend the opposite: turn into it, deal with it head-on, get ahead of it. Ask questions, google things, read, become an expert on the thing. Be the one calling the lender, not the other way round. This way it becomes a technical learning experience that's interesting and fun for you, and the lender is dreading your calls instead of the other way 'round.

I've been sued. It sucked. But I took it on boldly, and and actually led the fight and strategy (albeit with counsel). And turned it around so he wound up paying my legal bills. HA! With that precious experience, I know exactly what to do... I don't fear being sued, or if absolutely necessary, suing.

You might as well get the best financial education. You're paying the tuition!

I don't think the moral lesson is appropriate here. Maybe if this was LifeCoach.SE, but since it's not I would suggest trimming it down to just the personal finance advice. — Matthew Read, Jun 21 '16 at 18:32

score 9 · Answer 6 · answered Jun 20 '16 at 18:12

Another option, not yet discussed here, is to allow the loan to go into default and let the loaning agency repossess the property the loan was used for, after which they sell it and that sale should discharge some significant portion of the loan.

Knowing where the friend and property is, you may be able to help them carry out the repossession by providing them information.

Meanwhile, your credit will take a significant hit, but unless your name is on the deed/title of the property then you have little claim that the property is yours just because you're paying the loan.

The contract you signed for the loan is not going to be easily bypassed with a lawsuit of any sort, so unless you can produce another contract between you and your friend it's unlikely that you can even sue them.

In short, you have no claim to the property, but the loaning agency does - perhaps that's the only way to avoid paying most of the debt, but you do trade some of your credit for it.

Hopefully you understand that what you loaned wasn't money, but your credit score and earning potential, and that you will be more careful who you choose to lend this to in the future.

"allow the loan to go into default" This could have a big negative impact on his credit, which was mentioned in the question. — industry7, Jun 24 '16 at 19:43
@industry7 correct. This is why I said, "your credit will take a significant hit." They did mention both preserving their credit and not paying the full amount, but they didn't tell us which was more important, or what the loan was for. Therefore we can assume that one has priority, but it might be a bad assumption. So this answer provides information about an option that is perhaps less ideal, but might be worthwhile, particularly to others who read this Q&A later under slightly different circumstances. — Adam Davis, Jun 25 '16 at 01:09
@ Adam Davis. Ok, you're right, both of those things were mentioned in the question. Very good point, and so I gave you an upvote :-) — industry7, Jun 29 '16 at 17:24

score 3 · Answer 7 · answered Jun 20 '16 at 13:29

I would like to add one minor point for clarity: Cosigning means that you, alongside your friend, enter into a contract with the bank. It does not necessarily mean that you now have a contract with your friend, although that could implicitly be concluded.

If the bank makes use of their contracted right to make you pay your friend's debts with them, this has no effect on your legal relationship with your friend. Of course, you can hold him or her liable for your damages he or she has caused. It is another question whether this would help you in practice, but that has been discussed before.

The point you make is an important one. It's likely that suing the friend would only result in damages in the amount of the missed payments and any extra interest charges being awarded. Absent a contract between the two cosigners, there is no legal basis to conclude that primary signer's default with the bank means that the full amount of the loan is immediately payable to the secondary signer. — TainToTain, Jun 22 '16 at 17:31

score 3 · Answer 8 · answered Jun 20 '16 at 13:39

Without all the details it's hard to tell what options you may have, but none of them are good.

When you cosign you are saying that, you believe the primary signer will make good on the loan, but that if he doesn't you will. You are 100% responsible for this debt. As such, there are some actions you can take.

First, really try to stress to your friend, that they need to get you outta this loan. Urge them to re-finance with out you if they can.

Next look for "better" ways of defaulting on the loan and take them. Depending on what the loan is for you could deed-in-lue or short sale. You may just have to admit default. If you work with the bank, and try not to drag out the process, you will likely end up in a better place down the line.

Also of importance is ownership. If you pay the loan, do you get ownership of the thing the loan was secured against? Usually not, but working with an attorney and the bank, maybe. For example, if it's a car, can the "friend" sign over the car to you, then you sell it, and reduce your debt.

Basically as a cosigner, you have some rights, but you have all the responsibilities. You need to talk to an attorney and possibly the bank, and see what your options are. At this point, if you think the friend is not that much of a friend anymore, it's time to make sure that any conversation you have with them is recorded in email, or on paper.

score 3 · Answer 9 · answered Jun 21 '16 at 21:20

3

Sue the friend.

When you win, garnish his wages. It does not have to be by so much that it makes him quit his job, but get 75.00 per pay period to come to you.

This may require the use of a private investigator but, if you want to make this "friend" face consequences, this is your only option.

Otherwise, let it go and keep paying his bill.

answered Jun 21 '16 at 21:20

Eugene

39
1

3

Absent a contract between the two cosigners, there is no legal basis to conclude that the primary signer's default with the bank means that he owes the full amount of the loan to the secondary signer. Without a contract, the court may only award actual damages, which, in this case, is the amount of the missed payments and extra interest charges (if any). If the loan is secured by property, it's a much better idea to get the lender to repossess that property. – TainToTain Jun 22 '16 at 17:39

score 3 · Answer 10 · edited Jun 22 '16 at 08:54

I came across such a situation and I am still facing it. My friend borrowed my credit card for his expenses as he had misplaced his debit card and for the time being had asked for my credit card to handle the expenses he does.
He paid for initial 2 months and then was not able to make payments, mainly due to not being able to arrange money or if it was a contri party, he would collect cash from friends but again spend the same.
Months passes by... the bill had come upto 65k and calls from bank and other respective organizations Finally my dad came into picture and slowly the issue is resolving he has paid 50K remaining is still pending.

So basically, the reason I shared this part of story was he is my Best friend and in order to not spoil our friendship I did not want to take any such step which would later on affect our friendship. This completely depends on the individuals how they react to the situation. Keeping Ego, superiority, favour sort of feelings and words apart things can be resolved between friends. You do not know what is the situation on the other side. Probably you can connect with him ask him to explain you why is not able to pay the debts and take action accordingly.

If he is not able to provide a proper reason then you may take some actions like mentioned in initial answers, run after the assets he own or anything else.Stay Calm and patient. Do not take any such step which you would regret later on...!

Everybody's a friend until times get tough. Whether someone is a true friend can only be determined through how they handle negative events. It sounds like neither the person in your story nor the OP's are friends and should not be treated as such. — TainToTain, Jun 22 '16 at 17:27

score 2 · Answer 11 · edited Jun 20 '16 at 07:57

2

I think I'm reading that you cosigned a loan with a friend, and they've stopped paying on their loan. Not a whole lot of options here. You'll have to pay the loan off by yourself or allow the loan to go into collections in hopes that you'll get more money later and pay it off then. Small claims court is definitely an option at that point.

Next time, perhaps try not to cosign loans with friends unless you really trust them and are confident that you can pay the loan off if they cannot.

edited Jun 20 '16 at 07:57

enderland

4,186
2
20
41

answered Jun 19 '16 at 18:16

6

Don't you open yourself for legal action if you stop paying a loan you have consigned for? – Dmitry Grigoryev Jun 20 '16 at 10:19
2

Yes, you open yourself to basically the same legal actions as the primary signer including forfeiture of property. However, usually the property belongs to the primary signer exclusively. and so the bank has nothing to take away from you, except your credit rating. Oh and all your money, if you have account with them. (depends on things and jurisdictions) – coteyr Jun 20 '16 at 13:55

score 1 · Answer 12 · answered Jun 25 '16 at 18:57

If the bank is calling your employer, the federal Fair Debt Collection Practices Act (FDCPA) limits where and when debt collectors can contact consumer debtors. In many cases, debt collectors that contact debtors at work are violating the FDCPA.

http://www.nolo.com/legal-encyclopedia/a-debt-collector-calling-me-work-is-allowed.html