Co-Signing debts

April 5, 2018

Co-signing debts can be very problematic for the co-signer. Usually a debt is co-signed with the best of intentions most often for a family member. It is common to co-sign for a spouse or a child and sometimes people will also co-sign for friends.

Everything is good if the borrower is living up to his/her obligations but when they fall behind the co-signer’s credit rating may be adversely affected. A demand placed on the loan can lead to significant financial problems and there is often no way out except to pay the full balance or contemplate an assignment into bankruptcy or a proposal.

A family court can make an order in respect of liability for a debt to make one spouse or the other responsible, even when it is not their debt, or to sever the obligations giving relief to a co-signer or even the original borrower. The problem is that most orders from a family court are no better than an order from small claims court in the face of an insolvency proceeding and the creditor is seldom, if ever, a party to the arrangement.

The bottom line is if you aren’t prepared to pay out the debt in full, don’t co-sign.