Hello faithful followers, committed bloggers, and potential readers. It’s been some time since my last post. Let’s just say I’ve been a bit preoccupied. But not to worry. The absence was only temporary.
Iv’e been debating over which topic to write about in this….”come-back” post. The law provides so many interesting topics from which to choose that I simply, well, couldn’t. So, I put some of my favorite topics in a bag and drew one out. And wouldn’t you know it, it was the Co-Sign.
So, without further delay…..here are my thoughts.
First off, what is a “co-sign?”
A co-sign is when a person pledges, essentially, to take responsibility for another in the event the other person fails to meet his/her obligations under a contract.
I’m sure you are all familiar with the co-sign, so I won’t go into much detail over the ins and outs of one. However, I do want to discuss the risks and benefits of agreeing to be a co-signer.
Lets start with the benefits………..
THERE AREN’T ANY. Well, let me clarify. There aren’t any benefits for the co-signer (there are plenty for the co-signee).
But what about the risks?
Consider this scenario: Your best friend really, really, really wants to get a loan so that he can add that sexy new patio behind his house. And trust me, he needs a patio. The problem is that he has absolutely zero credit or collateral.
But, he’s also an optimist. He figures the bank will loan him the money based on his good looks and winning personality. So, he puts on his best suit, combs his hair back (and maybe adds a little product) and heads off to the bank.
He calls you later that afternoon with some disappointing but easily predictable news. “They won’t loan me a dime,” he says. “Apparently a 500 credit score is ‘bad,'” he remarks. “They told me that the only way they would loan me any money is if I had a co-signer.” – You know what the next question is going to be.
He begs and pleads for your help. “Pleeeaassseee be my co-signer,” he says. “I promise you won’t ever have to worry about it, you know I’m good for it.”
Reluctantly you agree.
Your friend is overjoyed. A few weeks later you all sign on the dotted line and your friend gets a loan for $30,000.00 (evidently he wants a really nice patio).
For the first few months everything is fine. Your friend makes every payment in full and right on time. But then……disaster. The job he had as a greeter at Walgreens is being eliminated. “What am I going to do,” your friend cries. “I loved that job. It had great benefits.”
All the sudden your world starts closing in around you. Are you going to have to cover the payments on that $30,000.00? “Surely not,” you think to yourself. “They wont come after me.”
I see this type of scenario play out a lot in my business. Usually it ends with the “friend” disappearing. The next thing you know your mailbox is filled with letters from the bank that might as well say “you’re screwed” on the front.
Your friend is off somewhere hiding (probably on that ridiculous patio) and you’re left to carry the weight.
And the worst part…..there is almost nothing you can do about it.
The second you sign that dotted line above the word “Co-signer,” you’re fate is sealed.
The only potential options you might have would be to claim undue influence, coercion, mistake, fraud…..but these claims/defenses are rare in the real world. This is due to the fact that most bank documents are air tight, leaving very little wiggle room.
So the big take away – DON’T CO-SIGN ANYTHING. You’re just asking for a potential world of trouble.
But, having said that, let me qualify it a bit more.
The lawyer in me urges you, very strongly, to never co-sign anything. But, the human in me says, again very strongly, never co-sign anything (unless you are simply morally compelled to do so).
But keep this in mind – the bank will not accept your good morals as reimbursement.
If I were you, I’d tell my friend to start saving….or by a few lawn chairs.
Good Legal Health.