Why Co-Signing For A Debt is NEVER a Good Idea (Part III)

So we were last talking about what remedies there are for you if you make the mistake of co-signing for someone.  The short answer is not many.   Depending on what type of loan you co-signed for determines what options you have to get out of the obligation to pay.  Student loans are the hardest by FAR to get out from under; the only remedy is if the lender allows you to be taken off of the promissory note (the loan obligation).  Student loan companies almost never do this, but when they do, it’s only if the primary borrower has made long-term, consistent payments, AND has good enough credit to warrant letting you off the hook.  As mentioned in Part II, you’re responsible for a student loan even if you declare bankruptcy.  Other loans, such as car notes, etc. are similar; the lender has to agree to let you out of the obligation.  The only difference is that traditionally, you can get out of these loans if you declare personal bankruptcy.

But stop for a second and consider this: if you loaned a stranger with “sketchy” credit a large sum of money solely on the basis that a creditworthy person would pay that loan back if anything went wrong, would YOU let the creditworthy person off the hook?  I certainly wouldn’t.  Even if Mr. Sketchy Credit paid me back at the rate he was supposed to, and was never late with those payments, I’d make sure that I had a “Plan B” in case Sketchy lost his job, got a divorce, etc.   And that’s just me, an individual person.  Banks, which rely on consumer lending to pay their bills and make profits, do this as their business.   Their very existence depends on how good they are at assessing the risk of lending people money.  This leads me to my (next to) last point…

Institutions in the business of lending money to people have more to lose than anyone when they decide to approve a loan, especially to someone with poor credit.  Banks and other lending companies have spent countless dollars developing a credit system, paying lawyers, accountants, and other professionals to help them establish the most effective and efficient way to lend money without losing that money.   Don’t fool yourself into thinking that your ability to evaluate Mr. Sketchy Credit’s ability to pay back the loan is better than theirs.

Before you cast me out as another non-feeling, cold, calculating lawyer, allow me to say this: I know you care about the person asking you to co-sign; otherwise you wouldn’t be considering tying yourself to them financially for (what could be) decades.  But ask yourself this question before agreeing to do it:  who are you really helping by agreeing to pay someone else’s loan?  If your friend or loved one isn’t capable of paying back the debt, then you’re enabling them to acquire MORE debt.  So chances are you’re not helping them.  If you end up being responsible for the debt, then that’s just more stress for you.  But the lender…the lender always makes out, don’t they?  They get to lend money to one person, but ultimately have TWO people to harass for it if the loan doesn’t get paid back.

So rather than co-signing for someone, what can you do to really help a friend/family member in need?  If you HAVE to get involved financially, I would suggest either: (1) giving them the money outright; or (2) sign for the loan yourself, leaving the other person off of it completely.  If you aren’t willing or able to do either of those things, then just tell the person that you can’t help them.  Lie if you have to.  Don’t allow a lender (like a car dealership) to even run your credit.  NEVER co-sign for a student loan, no matter what the circumstances unless you’re prepared to have it for life.

But maybe I’m wrong, and I am being cold-hearted.  Is there a situation you can think of that would warrant co-signing for someone?  Let me know what you think.

Why Co-Signing For A Debt is NEVER a Good Idea (Part II)

Where were we? Oh, right.  We were talking about why co-signing is one of the biggest legal and financial mistakes you can make in your life.  I was explaining how someone you care about might be in dire need of some thing, a car, an apartment, a loan for school, and how you helped them out by allowing them to use you as a co-signor.  Initially, co-signing can appear to be a painless process, one that can make your loved one’s life significantly better.  But it often ends up making your life a living hell.  How so?  Well, let’s use our previous example about you co-signing for “S” (your significant other) for that car they desperately needed, and fast forward two years:

You and S have split up, and haven’t spoken in over a year.  In fact, you hadn’t really thought about S until lately, and that’s only because you’ve been getting phone calls from MM’s Used Cars Collection Agency four or five times a week for the last two months.  When you talked to them initially, they informed you that S hadn’t made a car payment in three months.  You offered to give them S’s phone number.  The MM’s agent told you that they’re not interested in talking to S, and they don’t have to talk to S at all to get their money.  They want YOU to pay the back due amount, plus interest.  You told them you couldn’t afford to give them that kind of money, to which they replied that the delinquency is going on your credit report.  You’ve tried calling S to get this straightened out, but S doesn’t answer.  In fact, you don’t know where S is living or how to find them.  Meanwhile, you’ve stopped answering the phone when MM’s Collection Agency calls.  Three months later, you go to a dealership to purchase a much-needed car for yourself.  You are declined because your credit has tanked due to the missed payments for S’s car.

And as horrible as all that sounds, it can be SO much worse.   A friend of mine co-signed for a (now former) girlfriend’s student loan.  What can be wrong trying to help someone get their education?   Plenty.  My friend ended up having to file bankruptcy (due to other issues), and tried to get the student loan discharged too.   However, he was quickly informed that student loans can’t be discharged in bankruptcy.  The loan, which is over $50,000, is now his loan, and he and this ex-girlfriend will be tied together until it’s paid off.  That’s even if she dies.  If she doesn’t pay (which she hasn’t), his credit takes the hit.   If he doesn’t pay, his credit takes the hit.  Obviously the ex-girlfriend’s credit will suffer too, but what does she care?  She had terrible credit to begin with.  So what do you do if someone you care about asks you to co-sign for them?  I have a few thoughts on that as well some possible remedies if you find yourself in a co-signed nightmare.  See Part III for the deets.

Why Co-Signing For A Debt is NEVER a Good Idea (Part I)

That’s right, I said it.  NEVER.  That’s pretty strong statement, isn’t it?  Lawyers are very careful about using words that convey absoluteness, because it is the rare case that circumstances call for such language.  However, I feel pretty confident in telling you that co-signing for someone else’s debt is always a bad idea.

First, what is co-signing?  Co-signing is simply this: signing a contract with a lender saying you will be legally and financially responsible for someone else’s debt if that person doesn’t pay it.  You might ask yourself, why would anyone do this?  Most of us have enough of our own bills to pay, who’s got the time or energy to worry about someone else’s bills, too?   A lot of people do this, and do it for different reasons.  Here’s a typical example:

Your long-time significant other (let’s call them “S”) needs a new car.  In fact, S needs a new car desperately – and if they don’t get one soon, they’re not going to have transportation (in a place like Oklahoma, that’s a big deal – there’s not a real public transportation system here).  You accompany S to MM’s Used Cars, where S finds a reasonably priced car – no frills, no frumps, just a dependable car.    The car is $12,000.  You and S sit down at the negotiating table with a MM’s salesperson, where they run S’s credit.  You soon find out that S either has terrible credit or no credit; regardless, S cannot qualify for the loan they need to get a car.  However, the salesperson begins to question you, and finds out that you have had a good job for the last six years, make decent money, and have never paid a bill late.  The salesman runs your credit and you have an excellent credit score.  The salesman asks if you would consider co-signing for S.  S looks at you, begging.  S promises that they will pay their bill every month, and this will never even be a problem for you – they just need a car.  You love S, so you cave in and sign the papers.  S has possession of a new(ish) car, financed for the next 72 months.

Although I used a boyfriend/girlfriend example, this situation presents itself in a number of different ways; “S” can be anyone; it might be your cousin, your best friend since second grade, your niece or nephew, or your child.  It may not be a car; it might be for an apartment, or worse yet, a student loan (more about that later).  The bottom line is, someone you care about needs or wants something that they can’t obtain without a co-signor (or a “guarantor” in legal terms), and you fit the bill.  Your loved one is happy, the lender is happy, and you’re happy.  What could be the harm in this?  Plenty…see Part II for all the gory details.

Stand Your Ground Laws: Does the First to Shoot Always Have the Last Word?

If you’ve been paying attention to the news lately, chances are you’ve seen one of the numerous reports regarding the death of seventeen year-old Trayvon Martin, who was shot by armed neighborhood watch captain, George Zimmerman in Sanford, Florida.   The indisputable facts show that on a dark, rainy evening, Martin was walking to his father’s home in the gated neighborhood where Zimmerman was the neighborhood watch captain.  Zimmerman was patrolling the area in his vehicle, looking for suspicious activity.  According to Zimmerman, the area had been frequented with burglaries and break-ins.  Zimmerman saw Martin walking in the neighborhood and began following him.  What happened after that is in dispute, and has been the subject of hundreds (if not thousands) of articles, blog posts, pundit segments, and water cooler conversations.

For this post, rather than rant about what I think happened that night, I thought I’d shed some light on what “Stand Your Ground” laws really say and why they were enacted.  As an attorney that used to do exclusively criminal appeals for the State of Oklahoma (which has a similar SYG law), I have some experience in this area and have an idea or two about whether Zimmerman could be prosecuted under current “Stand Your Ground” statutes.  First, the black and white.  With regard to the Martin-Zimmeman issue, the Oklahoma SYG law says in part:

A person who is not engaged in an unlawful activity and who is attacked in any other place where he or she has a right to be has no duty to retreat and has the right to stand his or her ground and meet force with force, including deadly force, if he or she reasonably believes it is necessary to do so to prevent death or great bodily harm to himself or herself or another or to prevent the commission of a forcible felony…

Oklahoma Statutes Title 21, Chp. 53, Sect. 1289.25(B)

After reviewing Florida’s SYG statute, I have found it to be substantially similar to Oklahoma’s.

So what does all that mean? In a nutshell, it’s saying: a person who is in a place where they are allowed to be, AND is obeying the law, can use the force they feel is necessary to defend themselves or to prevent the commission of a forcible felony.  A forcible felony is generally defined as a felony against the person, i.e., rape, robbery, assault and battery, carjacking, etc.  If an individual is found to have acted under the SYG law, they are immune from being charged or prosecuted for the incident.  It’s almost like claiming self-defense…almost.

The SYG law differs from self-defense in quite a few ways, but the most important difference is what is known as the “duty to retreat.”  If a person is attempting to claim they used self-defense, they have to prove many things, one of which is the fact they couldn’t have gotten away from their attacker.  With the SYG law however, you can “stand your ground” and use whatever force you deem is necessary to protect yourself or someone else from attack.  A legitimate SYG case would look something like this:

OKLAHOMA CITY — A fast-acting convenience store clerk helped foil a carjacking in Edmond Friday.  Police said that two men jumped into a car near 2700 North Kelley and pulled a knife on the woman at the wheel.  The store’s owner saw it happen and held one of the attackers at gunpoint until the police arrived.  One man, Tarterrion Williams, was arrested on a complaint of armed robbery.

http://www.koco.com/news/1338733/detail.html

So what does the SYG mean for the Martin/Zimmerman case?  Well, for Zimmerman to be justified under the SYG law, the police would have had to determine the following:

1. That Zimmerman was in a place he a right to be;
2. That Zimmerman wasn’t doing anything illegal when Martin was shot and killed;
3. That Martin attacked Zimmerman, or Zimmerman believed that Martin was committing a forcible felony that

would prompt Zimmerman to reasonably believe he needed to use deadly force against Martin.

Based on the reports coming from the media outlets, witnesses to the incident, and the 911 tapes, it would have been impossible for the Sanford Police Department to determine that Zimmerman met all three of the above criteria on the night of the incident.  However, we do have enough information (even without Martin’s version of events) that would justify Trayvon Martin’s use of force under the SYG law, if any was used, against George Zimmerman, because:

1. Trayvon Martin was in a place he had a right to be;
2. Trayvon Martin wasn’t doing anything illegal when George Zimmerman began following him;
3. That Zimmeran attacked Trayvon Martin, or Martin believed that Zimmerman was committing a forcible felony that would prompt Martin to reasonably believe he needed to use deadly force against Zimmerman.

Unfortunately, we don’t have Trayvon Martin’s version of events, and never will.  While that is problematic, what’s worse is that in this case, police have only used George Zimmerman’s version of events to determine whether to arrest him, rather than use all of the evidence provided to them.  Worse still, we now have several witnesses to the event, several 911 tapes that seem to show that George Zimmerman was the aggressor, had race-based motives for pursuing Martin, and may have in fact illegally assaulted and/or battered Martin, that ultimately lead to the confrontation that ultimately led to Martin’s death.

Putting any ideas about race, the SYG law, or any fringe issues (like gun control, etc.) aside, I am most troubled by this one question more than any other: imagine how productive law enforcement would be if they always took the shooter’s word for what happened?  What do you think?

Welcome to jacksonlegalokc!

Hey everyone! I am currently a practicing lawyer in Oklahoma City.  I’m starting this blog to keep anyone and everyone who joins (or anyone who is just looking for interesting legal news) posted on current legal news, legal opinions, and other tangential items.  I’ll post on a weekly basis and most definitely welcome your comments on anything I post.  If you ever have any questions (whether legal or nonlegal) don’t hesitate to contact me, as I am extremely approachable.  Also, if you have any ideas on topics, ways to improve the site, etc., those comments are welcome as well : )  I’ll probably publish my first legal post next week, since Thanksgiving is in the next couple of days.  Until then, have a great holiday weekend and I look forward to future posts and your future comments!!