Co-signer rights

[Chingrile]

What is the name of your state? Texas

Yesterday, I received notification from one of our credit cards that the account was being closed due to something that they found on our credit report. This caused us great concern, because our credit has always been perfect.

We began to make phone calls and here is what we found out. My husband co-signed for a health care credit card for a friend of his approximately 18 months ago. The account has been in good standing until recently. Apparently, my husband's friend stopped making payments on the credit card and it was at least 140 days delinquent. At that time, my husband's friend negotiated a smaller monthly payment and made the November payment. We do not know if he will make the December payment and future payments, as we have not been able to reach him.

The credit card company told us that if we pay the sum in total, that it will be noted on the credit report as having been paid in full. It is quite a large sum of money. I have several questions about this:

a. Even if we pay the balance and close the account, what sort of damage will remain on our credit rating? Would paying the balance or a negotiated lower payoff be the best way to go?

b. The credit card company never contacted us in any way to let us know that the account was delinquent. We only found out because a different creditor (ours) is cancelling our account with them because of this. Is this legal for the credit card company with which we had the co-signment agreement to never contact us about the delinquency? If it is not legal, do we have recourse?

c. If we pay off the balance in full or partial, how can we go about getting our money back from the friend who did this to us? I think the amount exceeds the limit for small claims court.

Ii would appreciate any answers to these questions, even if it is just to refer me to a place where I can research the answers.

 

[LK.]

a. Even if we pay the balance and close the account, what sort of damage will remain on our credit rating? Would paying the balance or a negotiated lower payoff be the best way to go?

That depends on what you can afford in terms of cash, and what can you afford in terms of hits on your credit. To be a co-signer, one has to have a credit score strong enough to indicate that one is a person of means. The credit company is going to expect a settlement that typifies a person of means.


b. The credit card company never contacted us in any way to let us know that the account was delinquent. We only found out because a different creditor (ours) is cancelling our account with them because of this. Is this legal for the credit card company with which we had the co-signment agreement to never contact us about the delinquency? If it is not legal, do we have recourse?

That depends on the specifics of the contract that your husband signed. You may need to have it looked over by an attorney.

Granted, with a 5 month delinquent charge, you may want to find out why your husband has not checked in with the creditor in the last half of the year (if ever) to see if the account that he cosigned was being properly paid.

c. If we pay off the balance in full or partial, how can we go about getting our money back from the friend who did this to us? I think the amount exceeds the limit for small claims court.

By signing for the loan, your husband took responsibility for the loan. Do you have anything in writing that your friend agreed to pay you back if s/he defaulted? Given his/her need for a cosigner to begin with, it sounds like your friend had money problems and credit responsibility problems even before s/he went 5 months delinquent on the joint account that you have with him/her. Do you have any reasonable expectation that the court will find that your friend has an ability to pay?

Also, any judgement against your friend can likely be discharged if s/he files for bankruptcy.