What to do if I co-signed on a loan and the primary borrower defauted?

1) Can you sue your sister for not making her payments? Yes, you can, and you should speak with an attorney about doing this. You should be able to recover the payments she should have made.

2) Can you sue her for damage done to your credit rating? Probably not. That damage is very difficult to quantify, which makes it almost impossible to recover compensation for. You can discuss it with your lawyer and possibly add it to the complaint, but it's doubtful you will recover for this.

3) Bear in mind that you are liable for the debt you cosigned--that means that if she cannot or will not pay, the lender can come after you for the money owed. This situation will not resolve itself; you need to discuss your options with the attorney--you may need to try to negotiate something with the lender, or you may need to even consider bankruptcy. In the future, *never* cosign for anyone--your incur all the downside risk of their default without getting any of the upside benefit of the loan.