What Happens to The Cosigner if Someone Defaults on A Loan?
Before a person establishes his own credit history, it can be difficult for him to secure loans and other financial opportunities that require him to make full and timely payments. For example, a person may not be able to get a mortgage to buy a house if he cannot demonstrate that he will responsibly fulfill the terms of his lending agreement. When a lack of credit history or other barrier prevents a New Yorker from securing a needed loan, he may have to recruit a trusted associate or family member to cosign on the loan paperwork.
A cosigner is someone who provides a guarantee that a loan will be repaid even if the primary signer is unable to do so. Parents often cosign for their children so that their kids may buy cars, rent apartments and obtain credit; however, when those individuals fail to maintain their loan or credit payments, their parents may become liable for the outstanding balances of their debts.
Individuals who are asked to cosign on loans should carefully evaluate if they are financially prepared to take on other people’s debts if the others fail to properly manage the payments. A primary signer may be able to discharge his responsibilities with regard to outstanding debts through bankruptcy, but his cosigner may still be liable for the balance of the loan amount even after a discharge is secured.
Becoming a cosigner on someone else’s debts exposes a person to financial liability. A default on a loan can create financial challenges for a cosigner that may require him to explore his own debt relief options even when another person is primarily responsible for the due loan amounts. To learn more about becoming a cosigner and the liability that it can impose, readers may contact their New York-based bankruptcy and debt relief attorneys.