What to do if I co-signed on a loan and the primary borrower defauted?
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What to do if I co-signed on a loan and the primary borrower defauted?
I co-signed on a loan with my sister 6 years ago. I am now married and have asked her repeatedly to remove me from the loan and nothing ever came from this. Now 10 months later my wife and I are trying to get pre-qualified for a home loan of ourselves and come to find out she hasn’t been making payments for 8 months and now is considering foreclosure. Can I sue her for defaulting on the loan and for damages for my credit?
Asked on January 24, 2012 under Real Estate Law, Alabama
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
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.
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