Cosigned Loan Now in Default

I cosigned a loan for my sister a few years ago that is now in default because of circumstances beyond her control(loss of job, inability to find work. Although she tried to get them to work with her(its a student-type loan) and explained her circumstances it still went into default. It has been turned over to a third party debt collection and they are now calling me. They have called me many times before when she hasn't been able to pay, etc. and are now pressuring me to settle this debt by using our credit card or a check. This would put us in a bad financial situation because we already are struggling with our own debts because we went from a two income to one income family. What should I do? Should I try to settle it even if it means going into more debt just to get them to leave us alone?

Comments for Cosigned Loan Now in Default

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Jan 17, 2011

Cosigned Loan Now in Default
by: Mary

So sorry to learn about your situation; however, you have learned a painful lesson about the dangers of cosigning a debt for someone else, even for someone you love, like your sister. If the person you cosign for is unable to pay the debt, you must pay it and your credit history is damaged as well.

Given that I do not know the amount of the debt, the nature of the debt (you describe it as a "student-type loan", but I am not clear if that means it's a federal student loan, a private education loan, or something else) or the details of your own finances, I cannot provide you with specific suggestions about what to do. However, you have a couple options. For example, you can contact the collector to try to work out a payment plan that you can afford. Do not allow yourself to be pressured into agreeing to an arrangement that you are not comfortable with however.

Another option is to see if you can settle the debt for less than its outstanding balance; however, you may have to pay the settlement amount in a lump sum. If you want to explore this option with a reputable debt settlement firm, click here Consumer Recovery Network.

Filing for bankruptcy is a third option. Bankruptcy can help you wipe out certain kinds of debts and give you a longer amount of time to pay other debts. However, if the loan you co-signed is a federal student loan, you will not be able to use bankruptcy to get rid of it. However, if you are able to wipe out other debts through bankruptcy, you may free up enough money that you will be able to pay that debt. If you want to explore the option of bankruptcy as a way to deal with your financial problems, click here for a free consultation with a bankruptcy attorney.

Whatever you do, do not ignore the debt that you owe. If you do, you may be sued for the money, which will only add to your problems and further harm your credit history. Furthermore, if the loan you cosigned is a federal student loan, the IRS is entitled to take any tax returns you are entitled to until the full amount of your debt plus all interest and penalties due are paid in full.

Good luck resolving your debt problem!

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