Some Tennessee residents who are financially stable may wish that they could help other individuals who may need financial assistance. Many parties know that children who are starting out on their own may have a difficult time meeting requirements for loans and other financial aid, and as a result, some individuals may feel that co-signing for a loan would be helpful. However, if the child does not take responsibility for that loan, a co-signer could end up in a difficult financial situation and possibly need to file for Chapter 7 bankruptcy.
Though parties may think that they are simply assisting an individual to get approved for a loan, there are cases in which co-signers could end up having to pay part — if not all — of the loan back. It was reported that three out of four co-signers end up having to pay back at least some of another individual’s loan. If the primary borrower does not make the payments to repay the loan, the co-signer is legally obligated to take on that responsibility.
Having to pay for another’s loan could lead to the co-signer facing financial issues. Because a co-signer is legally bound to the loan contract, a lender could end up garnishing the wages of the co-signer if the loan is not being paid back. Though a party may have been in sound financial standing when he or she co-signed, his or her finances could quickly spiral downward if the primary borrower does not pay.
Though co-signing may be done with good intentions, the end result is not always pleasant. Tennessee residents could quickly see themselves facing financial difficulties if they are forced to make payments on someone else’s loan. If the situation becomes too overwhelming, those affected could find themselves needing financial assistance and possibly looking for information on Chapter 7 bankruptcy or other debt management options.
Source: Forbes, “The Risks Of Co-Signing A Loan With Your Kid“, Nick Clements, April 23, 2015