Bankruptcy

Co-Signors Beware ? Don?t Sign If You Can?t Afford It

By Carmen Dellutri, Southwest Florida Bankruptcy Atto

As a Consumer Bankruptcy Attorney, I get to see the amazing financial deals that my clients get themselves into.  Some of my bankruptcy clients must have been amazing salesmen to get family members and others to co-sign their debts.  I don’t know what a person would have to say to get me to put my signature on a piece of paper for them.  Unless, it’s a scene from The Godfather. ” My father put a gun to his head and said either his signature or his brains were going on that contract.”  (Michael)  Then I would have to consider the idea.  But, in the back of my mind I would be thinking about whether or not I could pay for this if the other party defaults.

Usually I am always upbeat and positive, and I like to make my clients feel like there is hope and a light at the end of the tunnel.  Sometimes the tunnel is long and dark in the beginning, but, the light eventually comes.

As you can tell, I really dislike co-signed agreements.  Most of the time, they were unnecessary to start with.  If a bank tells you that you cannot have a loan without a co-signer, walk away from the deal.  I have explained this too many times in my life, and it never gets easy.  I’ve told bankers no, I will not ask anyone to co-sign a loan for me.  If I won’t do it myself, think of how I feel when I see others fall for the lenders scam.  Yes, I said scam.

I don’t like explaining to people that their relatives and friends will be on the hook if they discharge their obligations.  I can see the utter disgust in their eyes and expressions on their faces.

This issue arose the other day when a Chapter 13 client asked me a question.  He said:  I want to short sale my house since the bank won’t work with me.  Can I do that?  My answer was simple:  Sure, you can. We can file a motion with the Court, and bada bing, it’s a done deal.

Then he asked the real question:  How will this effect my grandfather, the co-signer?  Ouch.

Well, this little turn of events creates a whole new set of issues.  First, in Florida the lender will have two options:  They can pursue the Grandfather for the deficiency or they can issue the Grandfather a 1099C debt cancellation notice.  Neither is a real good option, and both will have consequences for the Grandfather.

So, I guess my message is:  Buyer Beware.  If you are going to co-sign, pray that you will never be asked to repay the debt, but at the same time, be ready for the phone call to come that starts with.  I’m really sorry, but…

This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A.

Full post as published by Bankruptcy Law Network on March 13, 2010 (boomark / email).