As a co-signer on a loan, can I file a personal lien against the primary loanholder for being in default?

I co-signed on a student loan for a friend of the family in the amount of $4000. At the time I helped, I discussed with her the fact that my credit rating was premium and she had to guarantee she wouldn’t default and wouldn’t harm my credit rating at any cost. Well, she is in default in making timely payment and the lender is looking to me. If I pay the loan in full, can I file suit against the primary borrower and place a lien against her name until her debts are repaid to me? If I suffer credit damages due to her default, do I have other damages I can persue?

Asked on July 15, 2012 under Bankruptcy Law, Pennsylvania


M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

The fact that you have even a verbal agreement of sorts is a plsus since most co-signors do not.  Hre is what you can do: if the primary borrower defaults and you as the co-signer makes the payments, then you have a cause of action against the primary borrower to recover the damages.

You may also negotiate with the creditor to settle the debt. You should do that immediately. See if the debt is still in the hands of the original creditor. If so, then the original creditor may be reluctant to negotiate a settlement for less than the full balance. If the collection account is in the hands of a collection agent, it most likely purchased the collection account for pennies on the dollar. If this is the case, the collection agent may be willing to accept a lump-sum settlement for 10-15 cents on the dollar.  Good luck.

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