by Christopher Jackson, JD

Due to decades of accruing good credit and based off their guaranteed incomes from Social Security, many seniors are asked to co-sign for loans by family members. When a loan is  co-signed for, both the individual borrowing the money and the co-signer become legally obligated to repay the debt.

While most relatives ask a potential co-signer with good intentions and plan to pay the creditor, some seniors are left on the hook for these financial obligations. Sometimes, relatives simply get behind on their payments and do not warn the co-signer of their failure to pay, mostly out of fear or desperation. This lack of warning subsequently leaves the co-signer shocked when the creditor comes knocking and demands their payments.

Regardless of what desperate family members tell you, co-signing for a loan makes you as equally responsible for the loan’s payments as the borrower. Sadly, some family members will attempt to manipulate seniors in order to obtain the loan they seek. It is important to realize that there are few benefits to gain by co-signing for a loan, while there is everything to lose. Below are a few of the many things to think about before you consider co-signing on a loan:

• By co-signing a loan, you are guaranteeing that the loan will be repaid;
• If the borrower fails to make payments, you could have to pay up to the full amount of the loan;
• Under Michigan law, a creditor can attempt to collect the debt from the co-signer prior to collecting from the borrower;
• Co-signing a loan can reduce the amount of credit you can borrow in the future because the debt is outstanding on your credit report;
• Co-signing a loan can be a stressful ordeal and can cause problems amongst you and family members; and,
• When a co-signer dies or files bankruptcy, the borrower can face auto-default or be forced to repay the entire amount immediately.

In the event that you do choose to co-sign for a loan, MichiganLegalAid.org provides a small list of actions to take that can help to protect your interests. Other excellent resources concerning the co-signing of loans are offered by the Consumer Financial Protection Bureau and the Michigan Attorney General’s Office.

If you have additional questions regarding co-signing for loans or if you are facing unpaid loan obligations from co-signing, Elder Law of Michigan provides many resources to assist seniors. If you have questions or feel that you need assistance, please call the Legal Hotline for Michigan Seniors at Elder Law of Michigan at 1-800-347-5297.

Christopher Jackson is an attorney at Elder Law of Michigan, and has been a member of the Elder Law team since early 2014. Christopher holds a Bachelor of Arts in Political Science and International Relations from the University of Indianapolis, and graduated with his Juris Doctor in 2013 from Michigan State University College of Law. As an attorney at Elder Law, Christopher provides legal advice to Michigan seniors on a wide-variety of areas, including estate planning, wills and trusts, Medicare/Medicaid, social security benefits, and insurance issues.