Co-Signing Loans May Be a Big Mistake

Family! Family! Family! If you are like the rest of us, someone in your family always needs financial assistance. Many parents and grandparents want to help their children and grandchildren financially even, when it may not be financially wise to do so. Let’s look at one typical example.

The telephone rings and it’s your son calling. Your son says, “Dad, I am at the car dealer and got a great deal on a new car. Everything is almost done, but I need you to come down and sign the loan with me or I can’t get the car. They said you will just be secondary on the loan.” Being the great dad that you are, you hop in your car, drive to the dealership, and sign the loan documents. What did you just do?

Dad just became legally responsible for the car payment if his son fails to pay. Dad says, “My son will pay. He is a very good kid and very responsible.” Well, your son or family member may be the most responsible and well intentioned person in the world but life happens. For example, maybe he loses his job or his hours are reduced, maybe he cannot work due to a medical problem or disability, maybe he has other obligations and can no longer make the car payment. If the car payment is not made, dad, as co-signer, is legally responsible for the entire loan balance.

Every week I meet with at least one person who needs to file bankruptcy as a result of a loan where a family member has defaulted and the creditor filed a lawsuit against the co-signer. In today’s economy, it’s difficult enough keeping up with your own debts, but having to pay for someone else’s debt can be the last “straw”. The good news is that owing money on a co-signed debt can be wiped out or resolved in either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.

Here is some more information on Co-Signed Loans:


  • A co-signor is legally responsible for 100% of the loan. There is no “primary” or “secondary” responsibility;
  • Late payments and delinquencies will negatively affect your credit score.


  • Permits the borrower, who otherwise would not qualify, to get the loan;
  • Reflect positively on your credit report, if payments are timely;
  • Better loan terms (i.e.: lower interest rate).

Remember, the only reason you are asked to co-sign a loan for a family member is because the lender does not believe the family member can make the loan payments and your signature is their backup. The bottom line is you should not co-sign a loan for anyone unless you are prepared to make all the loan payments and can afford to make all the payments. This is true of any type of debt (i.e.: car loans, credit cards, signature loans, mortgages, and student loans.)

If you find yourself in a difficult situation, call our office to set up a Free Consultation with Lewis & Jurnovoy, P.A., so we can help you find a reasonable solution.