As a co-signer, what are my obligations if the person I co-signed with is paying but I’m not paying them?

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As a co-signer, what are my obligations if the person I co-signed with is paying but I’m not paying them?

My ex took out a loan to lend me money. I co-signed the loan. We made a verbal agreement that I would pay them $400/month toward this loan. I recently have had some financial issues and have stopped paying them; I planned to start again soon. To my knowledge they have continued to pay the loan (I have not received any late payment notices etc). Through a mutual friend I learned that they are considering suing me for breaking our verbal agreement and not paying. Since the loan is being paid and I am only a co-signer, would there be any legal merrit to them suing me?

Asked on August 3, 2010 under Bankruptcy Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

In addition to potentially suing you on the loan itself (see below), your ex would seem to have grounds to sue you on the verbal (or more properly, oral) agreement between the two of you. If you agreed to pay $400 a month, that agreement may be enforceable--as a general matter, oral contracts are enforceable.

Furthermore, even without that, as cosignor, you are equally liable for the loan, and another signor may well be able to sue under the loan instrument, for not making your contributions to it.

In short, there seem to be two different grounds under which your ex may be able to sue you. And, of course, if your ex stops paying, the lender would have the option of suing either or both of you.


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