What Can I Do if I Co-signed for a Debt & Now They're Not Paying?

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    Make The Payments

    • If the primary borrower is not making the payments on the debt, you can make the payments yourself. Ask the lender when you sign the loan contract to notify you if the payments are more than 10 days late. This will give you time to deal with the situation before it affects your credit history. It may be easiest when the loan first becomes late to make the payments, and take the matter up separately with the primary borrower.

    Surrender the Collateral

    • If the loan is a secured loan, such as an auto or recreational vehicle loan, you can surrender the collateral. Contact the lender and let him know that you wish to do this. You may be able to assist them by revealing the location of the collateral if the borrower is trying to hide it. The bank will repossess the item and sell it at auction. You will still be responsible for the remaining balance after the sale and your credit rating, as well as the primary borrower's, will be damaged.

    Negotiate a Payoff

    • If you have a deficiency balance after a repossession or a past-due loan on which you are a co-signer, you can negotiate a payoff with the bank. The bank will often accept a percentage of the balance for a settlement because some money now is better than the future chance of collecting the money. Be sure to get documents releasing your liability for the loan before you pay the negotiated amount. The bank may still try to collect the remaining balance from the primary borrower, but you would not be liable in this case.

    File a Lawsuit

    • You can file a lawsuit against the person that you co-signed for. In many cases this may be a family member, so this may not be an acceptable solution. In addition, the person could not or would not pay the bank back for the original debt, so they probably won't treat you any differently. If you can get a judgment against him, you may have to take additional means to collect it, such as garnishment of his wages or attaching his bank account.

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