Co-Signed Debts

What does it mean to co-sign a debt? Make sure you understand before you take on the responsibility. By co-signing, you are being asked by the lender to guarantee repayment of the debt. The same reasoning applies to applying for a joint loan/credit line/credit card too. Be sure to think it through before going ahead. If the primary borrower does not pay back the debt, you will assume responsibility to have to. Be sure you want to have this responsibility and that you could afford to pay it back if you had to.

In most cases you'd have to pay back the full amount including any interest and penalties if the primary borrower does not pay. Being joint on a debt does not mean you're only responsible for paying half the debt as the other co-signer has to pay the other half, this is not true, you're both 100% responsible to pay back 100% of the debt. You may also find that the lender will report the status of the loan on the credit reports of both the primary lender and co-signer and as such you'll both be affected negatively if payments are not maintained.

The lender will collect this debt from you. In some cases, the lender can request payment from the co-signer, without first trying to collect from the primary lender. If in default, the lender can and most likely will collect the debt from you using the same methods that they'd use against the primary borrower, such as taking you to court, repossessing pledged collateral and, garnishing your wages.

Filing a consumer proposal or an assignment in bankruptcy will relieve the person who files of the obligation to pay the debt. The co-signer, if not filing a proposal or bankruptcy would still be responsible to maintain payments. That is one reason why a lender would be reluctant to remove a co-signer from responsibility for the loan as they know if one of the two borrowers files for bankruptcy, the other would still be responsible for the debt – they double their chances of having the debt repaid. If neither borrower could pay for the debt, both would have to file separate bankruptcies or proposals in order to be relieved from the debt.

I you are unable to meet your debt repayments, including and debts you have co-signed for, please call us at 310-PLAN or email me your questions.