Don't Co-sign or Guaranty for the debt of others

Have you been asked to co-sign or guaranty a loan for someone?


It doesn't matter if it's your child or favorite niece, don't do it. I have handled numerous debt related matters where the friend or loved one failed to pay the debt, such as a car loan or mortgage. You know who the bank comes after to collect? You, the guarantor or co-signer.

I don't care what kind of sob story they give you. You'll regret the day you did.

AND THE COROLLARY -- a friend has come and asked to borrow money from you with all sorts of promises to repay.

Tell them you're not a bank.

If you loan them the money, you won't see it. They're probably a bad credit risk. Plus it'll ruin the friendship when they don't pay you. And if you tell them 'no' and that ruins the friendship, then you can use that as a gauge of what type of friend they really were.

So if you insist on loaning them the money (against my advice), then

(1) put down the terms of the note and repayment in writing, signed by debtor, AND

(2) a) write off the debt as a gift and don't expect payment OR

b) see a lawyer and secure the note (drafted by an attorney) with a security interest in real or personal property. That way if the debtor fails to pay, you can collect against the asset.

Call me if you need a collection lawyer at 336-724-4707. The longer you wait, the less a lawyer can help.