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  • Options for Cosigners of Defaulted Loans (Part 1)

    Cosigners of loans do have some options in the event that the other borrower on the loan is unable or unwilling to continue paying on that loan.

    Cosigners of loans do have some options in the event that the other borrower on the loan is unable or unwilling to continue paying on that loan.

    While many financial advisors will strictly warn their clients to be careful about cosigning a loan for a loved one, parents cosigning loans for their children – and these days, more commonly children cosigning loans for their parents (or loved ones) – is commonplace; therefore, it’s crucial that cosigners are aware of what their role is and what to expect in the event the loan they have cosigned is defaulted on. Regardless of whether the person for whom the loan is for can no longer make payments or has intentionally decided to stop paying on the loan, the cosigner will be responsible for making any missed payments or will suffer negative impacts to his credit score if the payments are missed.

    In such cases, cosigners have the following options for dealing with loan defaults:

    • Try to secure a forbearance – If the other person on the loan cannot make the payments for a temporary period of time but does intend eventually, when possible, to make the payments, and if you as a cosigner cannot make the payments in the interim, you may be able to secure a forbearance from the lender. A forbearance can suspend loan payments for a period of a few months, which may be just enough time to help you or the other person on the loan gather the money necessary to continue making the monthly loan payments.
    • Attempt to secure a loan that could get you out of the cosigned loan – Although difficult, you may be able to secure a loan that would allow you to pay off the cosigned loan early, would transfer the debt to the other borrower named on the cosigned loan and would get you off the hook for the other borrower’s debt. However, because the initial loan required you to cosign it in the first place, it is unlikely that another lender (unless that lender is a private party) would be willing to have the original borrower be solely responsible for the principle of a debt.

    If you are struggling with debt and are looking for a financial fresh start, contact the trusted Colorado bankruptcy lawyers at The Law Office of Andrew McKenna. For more than 20 years, we have been successfully overseeing our Clients’ bankruptcy cases so they can resolve their financial issues as beneficially as possible. Our comprehensive legal knowledge coupled with our vast experience allows us to consistently and efficiently help our Clients achieve the best possible resolutions to their financial matters. For an evaluation of your case and expert advice regarding how to move forward, call us at (303) 730-8819.


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