|Think before you co-sign!|
Your Responsibility As a Co-Signer
When you co-sign for a debt, you are potentially handing over your income and good credit score in order to help a loved one. As a rule, co-signing carries NO benefit for the co-signer – only risk. Nobody co-signs a debt believing that they'll end up on the hook for the payments. But even if the debtor is financially responsible (and that's an iffy prospect, given the fact that the debtor needed a co-signer in the first place), circumstances beyond their control could leave them unable to make the payments.
That's where you come in. The creditor doesn't care that you weren't expecting to be saddled with this debt. Nor does it matter if you are financially strapped yourself and simply can't afford the payments. In some cases, creditors and collection agencies can pursue an account's cosigners for payment – even going so far as to file a lawsuit – without first pursuing the debtor. This simply means that when the payments stop, creditors and collectors can bypass the debtor and make a beeline for you.
Collection Agencies Can Sue Co-Signers
People in a financial bind pay priority debts, such as mortgages, car payments, utilities, etc. first and apply any leftover income to non-vital debts, such as credit card bills and collection payments. Given the high volume of people in trouble financially, many collection agencies have had to turn to alternate routes of collecting debt. Suing the debtor and/or his co-signer is one such method.
The exception to this rule occurs if the debt is an old one and beyond the statute of limitations in the debtor and co-signer's state. Occasionally an unscrupulous collection agency will try to file a lawsuit after the statute of limitations expires, but either the debtor or the co-signer can use an expired statute of limitations as an airtight defense in a debt collection lawsuit.
Avoiding a Debt Collection Lawsuit As a Co-Signer
|Want to say out of court? Don't co-sign!|
An even better way to prevent a debt collection lawsuit is not to co-sign in the first place. The account goes onto your credit report as well as the debtor's. This means all activity connected to the account such as high balances, missed payments, etc. can and will affect you. Co-signing is like drugs kids, just say NO. And don't you dare let yourself get pressured into co-signing by a loser family member who can't keep his financial ducks in a row. Don't feel pity. Don't make excuses for the person. And above all, don't co-sign!