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Old 09-23-2010, 06:34 PM - Thread Starter
 
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What is your personal policy about co-signing loans? Especially for someone who is already in default of at least one loan you know of. To make a long story short, my nephew (21 yo) cannot get a car without a co-signer because he has made stupid decision (even after I have told him NOT to) after stupid decision. He flunked out of college (skipping classes because of being hung over), he took out WAY more in loans than he needed to buy things like plasma TV, gaming system, huge speakers for a car that was a piece of crap... he even bought a motorcycle... in October last year... and although I said it was a truly stupid thing to have as your only transportation in the Midwest in winter, it didn't matter because it broke down a month later and he had to junk it. The list goes on and on. I gave him a car that we were going to use as a trade-in when we bought our new (used) car a few years ago. He wrecked it and they gave him $3000 in cash, which he blew through without getting another car.

I feel like we've done our part. I KNOW he will default on this loan. He has not been responsible about ANYTHING. Now, financially, we do fine and are literally the only ones in the family that do so. But we do fine because we are disciplined and smart with our money. We save in advance for any major purchase and anticipate it in plenty of time, shopping smartly. We have emergency fund and save for retirement, dd's schooling, etc. We live simply and I cook almost everything from scratch, sew, make our soap, and we don't blow money on electronics (we all have old phones without even texting and our TVs are all old CRTs). We are very careful to be debt-free while keeping exceptional credit scores. We work HARD to be in this position. And have done so for decades (we're in our 40's and 50's). I am not willing to risk our financial security at this point in our lives (dh will retire in about 10 years) or what we have done to provide for our dd.

My sister is now bugging my mom about co-signing. We SUPPORT my mother and she lives with us. If nephew defaulted on the loan, my mom wouldn't have the money to make the payments... it would be US! Not to mention that she is our financial dependent (according to the IRS), so if she dies, her financial obligations become ours (and we're OK with this, as things are NOW, but not if she co-signs the loan). I'm not even sure she could co-sign because mom has poor credit (lost her home, that had been paid off, because of using it as collateral for a loan for my sister... who then defaulted on the loan and my mom had to pay it off.)

There is SO much more to this story, but I just don't think that co-signing for anything is a good thing. My dh has said "No way!" I say "No way!" My mom wants to do it. She gets $600/month SS and all of that goes to Medicare supplemental insurance, meds, paying to go to the Senior Citizens Center a few times a week, and buying her own underwear. We pay, literally, for everything else... from buying her car and paying all auto expenses, utilities, phone, food. Everything.

I don't know what to do. We can't "forbid" my mom from co-signing, but it would be such a fustercluck if she did and I don't know what to do.

Thoughts?
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Old 09-23-2010, 06:51 PM
 
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Yeah I don't know if you could convince her not to do it, but I'd definitely try. And why is your sister trying to have this done anyway? Of all people, she should be the cosignor.

My policy on co-signing is, never again. We've done it twice, for 2 of our nephews. The first one, the older brother even, royally screwed us over. The other one was very responsible and never missed a thing (we only co-signed for him because his parents are out of the picture, he needed a vehicle and he wasn't 18 so he had to have a co-signor).
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Old 09-23-2010, 06:53 PM
 
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I doubt that the bank would take her as a co-signee if her credit is bad.

For sure, I would not co-sign for someone as irresponsible as your nephew. We have co-signed for DH's family in the past, but we knew that they would not default.
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Old 09-23-2010, 07:06 PM - Thread Starter
 
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My sister can't co-sign because she just went through bankruptcy herself. She's not exactly the best financial example for my nephew. This *is* learned behavior.

I have 0 doubt that my nephew will default on this loan. He says he'll lose his job (he's been through DOZENS of jobs over the past few years) if he doesn't get a car. My sister is tired of taking him back and forth to work. He still lives with her and pays nothing toward living expenses. Not once have they asked to sit down with us and try to find another solution.

ETA: My sister has told my mom that if she doesn't co-sign, that they will no longer be part of her life. I REALLY, REALLY am pissed off about the threat. That is part of "more to the story". Ugh! I hate this drama!
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Old 09-23-2010, 07:17 PM
 
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I would not co-sign and I would try to convince my mother not to although I would acknowledge she is an adult and can make her own decisions (but point out you are also on the hook) and I would plan what happens in a default (like having a set of keys and driving the car to the dealer/financing company/whatever) to minimize the damage. I would also try to steer everyone towards a beater.

You clearly have done your part.

We have co-signed in the past but with the following rules: 1) It could not be a loan period greater than 2 years, just in case we ran into trouble. 2) It could not be an amount for which we couldn't meet the payments ourselves. I'm not sure we would do it again.

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Old 09-23-2010, 07:23 PM
 
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I would not co-sign. what a crappy situation.

My family: me jog.gif, dh geek.gif, ds reading.gif (11), dd1 hearts.gif (9), and dd2 energy.gif(3).

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Old 09-23-2010, 07:28 PM
 
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Seeing as how your mother lives with you and you support her, could you convince her some way not to do it? Like telling her you can't afford it if he defaults, and her debt then becomes yours? Your nephew needs to learn responsibility and save for his own vehicle.
I also doubt that your mom would be accepted as cosigner anyway.
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Old 09-23-2010, 07:30 PM
 
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We just co-signed a loan for a friend who is attending grad school. She's lived with us three times. The last time she stayed for two and a half years, and was our house sitter for a year during that time. We've been friends for ten years, and I've always known her to make financially responsible decisions. She's never owned a car because she couldn't afford one. We had no problem cosigning a loan for her.

I would not cosign for your nephew.

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Old 09-23-2010, 07:30 PM
 
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No way would I do it, and I'd tell my mother in no uncertain terms not to either. In fact, I'd tell my sister to drop it already, she can help him if she wants, since it's her kid.
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Old 09-23-2010, 08:06 PM
 
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heck no!

If he wants a car bad enough he can go to a buy here-pay here place. You dont need credit there, just a job

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Old 09-23-2010, 08:13 PM - Thread Starter
 
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heck no!

If he wants a car bad enough he can go to a buy here-pay here place. You dont need credit there, just a job
According to him, he was not able to even get that. Is that even possible?
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Old 09-23-2010, 08:51 PM
 
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they look at your income in relation to vehicles that you are interested in. If he couldn't qualify for those he either A) doesn't have enough income to get ANY vehicle or B)wants a REALLY REALLY nice vehicle...that he obviously cannot afford and is not willing to compromise

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Old 09-23-2010, 09:04 PM
 
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If your mom only has $600 a month I doubt she'd qualify as a co-signer. All the people I know would not co-sign anything. DH's parents who are quite well off, and trust their son very much, would not co-sign for a loan years ago. DH was working a stable job making $50k a year at the time. He used buses to get to work everyday, and bought a car with cash a year later using the money saved.

I'd offer your nephew a personal finance class as a gift. It'll be valuable for a young guy like him.

Mom to 2 beautiful autistic boys (12 & 11)  
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Old 09-23-2010, 09:04 PM
 
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we have been asked to co-sign for my bil in the past, which we declined. Him and sil were very young and (still) irresponsible and frankly dh and I knew that at some point that loan would be ours which although we would be able to afford we didnt want. Plus we were worried about them ruining our credit along with it.

Although I doubt the bank will accept her as co-signer can you talk to your mom and explain how you will NOT pay any portion of the loan and remind her of your nephews past irresponsibilities. At some point he needs to "get" that his irresponsible behavior/bad choices are going to cost him via using public transportation or walking.
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Old 09-23-2010, 09:13 PM
 
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Would you be willing to give him say a $1000 car as a gift. Totally in his name and under his responsibility. It is transportation and beggars cannot be choosers. Then say No More! That would help him, be a minimal cost to you (not saying it isn't a lot of money, but you wouldn't have any further responsibility) and would protect you and your mom.

ETA - I would not cosign. I also think what your sister is doing is emotional blackmail and wrong.
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Old 09-23-2010, 09:18 PM
 
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I will not cosign a loan even under the best of circumstances.

Your Mother's debt becoming yours makes no sense. If she is allowed to make her own decisions than she must have control of her own finances. Why would you be liable?
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Old 09-23-2010, 09:42 PM
 
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Definitely not in your situation. Most likely not in any situation.
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Old 09-23-2010, 09:44 PM
 
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I would not co-sign. what a crappy situation.
Just don't. Times are hard. Even the most well meaning grown-ups are falling short in these harsh economic times.
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Old 09-23-2010, 09:53 PM - Thread Starter
 
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I talked to mom a little more tonight. I don't think she is going to do it. She wants me to be in on the phone conversation when she talks to them and I told her I would.

I will try to update after we have the conversation with my sister. Thank you all for your thoughts and input. It's both comforting and thought provoking.

I would have no problem helping my nephew get a small, cheap beater car (or even a moped, which soooooo many lower income people around here get by with all 4 seasons!), but he doesn't want that. He, "has his image to think about." That right there tells you a lot. He and his mother both are "keep up with the Joneses" kind of people.
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Old 09-23-2010, 09:57 PM - Thread Starter
 
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I will not cosign a loan even under the best of circumstances.

Your Mother's debt becoming yours makes no sense. If she is allowed to make her own decisions than she must have control of her own finances. Why would you be liable?
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We are liable because we claim her on our taxes as our dependent. It would be the same if you had a teen-aged son that incurred debt and you were still claiming him on your taxes as a dependent. You are then liable for his debt in the case of his death. My mother, in the eyes of the IRS, is not much different than our daughter. In truth, is not much different in many ways, including behavior.
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Old 09-23-2010, 10:15 PM
 
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No advice for you beyond what's already been said, but I'm so sorry you're dealing with the family drama. I can totally sympathize in that department!
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Old 09-23-2010, 10:37 PM
 
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No way would I co-sign for your nephew. Good for you supporting your mom against this emotional blackmail from your sister & nephew. All this drama sounds really hard on all of you. Yeesh!

If nephew needs a car for transportation that badly, he would be thankful to get a free paid-for older car or a moped from you. If that's not good enough for him, then he can just do without. I really hope your mom has the strength to say no. (Though I doubt she'd qualify to co-sign anyway.)

Good luck.

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Old 09-23-2010, 10:42 PM
 
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He, "has his image to think about." That right there tells you a lot. He and his mother both are "keep up with the Joneses" kind of people.
That alone would prompt me to tell him to kiss my a$$.
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Old 09-23-2010, 10:46 PM
 
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I wouldn't in that situation. I would be shocked if the bank allowed her to cosign, though, unless she's got a lot of other assets somewhere, in which case one would think she could cover it...

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Old 09-23-2010, 10:49 PM
 
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No, I would not co-sign.

Also, if I was in a position where I would be legally liable for someone's debt, I would probably want a power of attorney signed so I was in charge of their finances.
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Old 09-23-2010, 10:53 PM
 
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uhh no. stop enabling him. and the sister. honestly it sounds like a good deal to be cut out of their lives since they just come around when they need something right?

mama to one '07 and one '09
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Old 09-23-2010, 11:29 PM
 
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We are liable because we claim her on our taxes as our dependent. It would be the same if you had a teen-aged son that incurred debt and you were still claiming him on your taxes as a dependent. You are then liable for his debt in the case of his death. My mother, in the eyes of the IRS, is not much different than our daughter. In truth, is not much different in many ways, including behavior.
I think you should look into this further. If your minor child had debts, you are responsible BUT if your adult child who is still your dependent (because you are paying for college) runs up debt the parents are definatley not responsbile UNLESS they have cosigned.

 

 

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Old 09-24-2010, 12:05 AM
 
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No way. Especially after the threat of 'no longer part of the family'.

Michelle -mom to Katlyn 4/00 , Jake 3/02, and Seth 5/04
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Old 09-24-2010, 12:08 AM
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Probably the only people I'd co-sign for are my children.

"Our task is not to see the future, but to enable it."
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Old 09-24-2010, 01:57 AM
 
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Glad it sounds like you've got it under control but could I suggest that this be put forth to your nephew as an opportunity to make some larger changes? He sounds like he could use a bit of tough love right now. And a bike, which was my only vehicle for many years. I've got close family like this and believe me, enabling them is not helping them in any way. Sorry you're going through this.
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