I know and my advice has always been don't do it. However, several years ago a friend co-signed for an adult child. That child is now horribly mentally ill and causing all kinds of problems for the co-signer on a lease. Can anything been done to prevent my friend from declaring bankruptcy?

Thanks

As far as I understand, the only way to remove a co-signer is to refinance the loan under the other name only.

Can't just remove a name once the loan is written.

Might sue the problem person for damages and breach of contract and whatever else might stick.

It's one thing if the primary fails to pay and the co-signer is liable. It's another thing of the primary causes damages and additional liability. But that's between the two of them, not the lessor.

While the document that was co-signed is still in operation, the holder isn't going to let the co-signer off the hook. There's no upside for them.

And unfortunately, if the mentally ill adult child is way behind on payments and has therefore screwed their credit even further than when they first started, the chances of them being able to qualify to refinance the loan/qualify for a standalone lease by themselves is nil. They needed a cosigner to begin with, and now they're in even worse financial shape.

It's a Catch 22 - Need to refinance the loan/sign a new lease to get their name off it because the other person is a deadbeat, but the other person can't refinance the loan/sign a lease because they're a deadbeat.

Hence why the prevailing advice is never to cosign on a loan or lease.

As a retired banker, we generally called a co-signer a ‘fool with a pen’. Yes, parents need to help their kids get started but they need to keep tract of the debt.

Under some circumstances we would release a co-signer in writing. That was only if our position was not put in jeopardy.

Hopefully your friend can liquidate the collateral, if any, and pay the residual. He can also have the lender assign the note to him, once paid, so he can litigate if he chooses. No easy out.

“Hence why the prevailing advice is never to cosign on a loan or lease.”

I cosigned a lease. A very expensive mistake.

Would a solution be:
1. Determine the cost to pay for the lease and obtain funds using some source of financing
2. In accordance the terms of the lease, declare the lessee is vacating the premises on date certain
3. Pay the lease to the date certain
4. Relocate the adult child to another residence
5. Repay the financed lease total

Regarding relocation of the adult child...as mentally ill, seek state assistance with a group home or similar as the future residence prior to beginning the effort.

Utility bill cosigning, which we later revoked when that child was no longer living at the location. Routine paperwork at that level.

Auto loan, which was paid off a year early, again, routine paperwork cancelled by the debt being satisfied. Since the family member had the balance in savings and used it to pay off to be debt free, it's all good.

There is cosigning and there are children who aren't mature enough yet to make it work well, the real issue is impatience on their part, which goes to the life experience of having to save up and pay cash might be a better option in the long run.

OP has noted this isn't working. If said individual is actually mentally ill, then a court would have defined and adjudicated it. Otherwise, it's just bad behavior and all debts remain. Now we get into why closer contact and observation wasn't in the mix, which is way beyond the point of the topic.

Cosigning isnt always a disaster, but certainly can be.

Right up there with loaning money. Every single family member (all on my wife’s side) that I have loaned money to has defaulted. Every single one. Subsequently acted like it never happened as well.

I knew better but they were all small amounts that I like to call my down payment in never having to loan these people money again.

Don’t co sign. Ever. Hope it works out for your friend. It won’t but we can dream.

quote:

Originally posted by maxwayne:
I know and my advice has always been don't do it. However, several years ago a friend co-signed for an adult child. That child is now horribly mentally ill and causing all kinds of problems for the co-signer on a lease. Can anything been done to prevent my friend from declaring bankruptcy?

Thanks

What did they co-sign for?

If he co-signed on a lease, his guaranty is only for the term of the lease. He probably is not stuck forever. Of course the terms of the lease and state law will control. But I think there is a good likelihood that he can give the lessor notice that he is withdrawing his guaranty at the end of the current term. At that point the lessor can decide to extend the lease without the guaranty or to end it.

If it’s a ten year lease, he’s stuck for ten years. But if it’s a 3 year lease with options to extend, or states that it becomes “month to month” at the end of the primary term, I think he has a good shot at getting out. Again, it depends on state law and the actual terms of the lease.

If he’s not a guarantor, but an actual co-lessee, he may have greater rights, and be able to seek some other remedies, as he would be entitled to peaceful possession himself.

Question - has your friend tried explaining the situation to the creditor? I would think that the mental health issues would be a concern to them, as far as capacity to understand and/or repay. I know that a bank would take that factor into consideration.

Edit: Asking as someone whose spouse has a documented mental health disorder (bipolar).

quote:

OP has noted this isn't working. If said individual is actually mentally ill, then a court would have defined and adjudicated it. Otherwise, it's just bad behavior and all debts remain. Now we get into why closer contact and observation wasn't in the mix, which is way beyond the point of the topic.

^^^^^^^^^^^^^
This is incorrect. There are plenty of mentally ill people. Only a very small percentage have been judged to be mentally ill and ordered to seek treatment. Probably less than one percent.

Thanks to all for the assistance. My friend cosigned on a rental agreement on a house. The child has not paid rent in some time and the covid rules allowed her to go even longer without paying.

The owner wants her out by a certain time and if that happens, there is no penalty. However, the child refuses to allow my friend to pack her belongings or throw junk away. My friend is under a deadline to vacate the premise, but the child refuses to allow any such action.

The child has had drug and mental problems for years.