5/28/2017

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Think Before You Co-sign

Many people get in financial, and at times, legal trouble when they co-sign for a loan on a car, home or other real estate, credit cards, jewelry, furniture, or other items of value. They co-sign out of love or simply because they want to help a friend, boyfriend or girlfriend, relative, or co-worker, buy, lease, or rent something that they can't get without the help of someone who has good credit or good income.

Although they think about the pros and cons of co-signing with someone and they understand the consequences of what would happen if that person, for some reason, begin making their payment late or stop making payments altogether, they make the decision to go ahead and put themselves in financial jeopardy.

The person being helped may have all good intentions but they may unwittingly take on more than they can handle financially, they may lose their job, or they may become negligent in meeting their monthly obligations.

The problem with co-signing with someone is that you don't know how they will handle your goodwill, your love, or your trust, even if they are your child, parent, brother, sister, or good friend. Sometimes things start out great but then turn sour later and sometimes things start out rotten from the moment the arrangement is consummated.

This not to say that things always happen this way because most people, when getting someone to help them purchase something by agreeing to cosign with them, take the responsible route and pay their debt as agreed to and as a co-signer, you never have a worry.

But there are times when people do get caught up in unpleasant circumstances with a co-signer, and their credit scores suffer the unfortunate consequences. There may be lawsuits, defaults, foreclosures, garnishments, repossessions, and bankruptcies filed as a result of good intentions going bad.

Many close friendships are lost because of such financial arrangements, families are torn apart, and once this is done, there may be no way to re-establish a loving relationship between the parties.

If you co-sign on a home loan, whether you are doing it with a casual friend, boyfriend or girlfriend, or even if you are married, there may come a time when friendships and/or marriages go sour and one, or the other co-signer, either wants to be removed or wants the other party removed from the title to the property.

If both parties don't agree, the only way one can remove the other from the deed is by court order. One co-signer would have to file a petition with the court and then convince a judge to remove the co-mortgagor from the title to the property. It would be nearly impossible to convince any judge to award the property to the plaintiff unless it can be proved that the other party involved is either missing or dead.

Both parties will have to agree to either sell the property or to refinance it. No reputable bank or mortgage company is going to give a loan on the property unless both parties participate by agreeing, in escrow, to sign off on it. Most title companies will not even consider issuing a policy of title insurance on properties that are under duress because of legal and ethical ramifications.

In this case, both parties have to come to an agreement and if a compromise can't be worked out, attorneys will have to be brought in and court action may become necessary between the parties.

In all cases, co-signing for anything should be given a great deal of thought by the person being asked to do the co-signing and if there is any doubt, hesitation, or concern about doing it, it may be a wise idea to decline.

 

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