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Difference between revisions of "Co-signing, Guarantees and Joint Debts"
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Co-signing, Guarantees and Joint Debts (view source)
Revision as of 22:26, 16 September 2018
, 22:26, 16 September 2018no edit summary
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Technically, creditors usually ask joint debtors to be “jointly and severally” liable (each person is responsible for the entire debt). This gives the creditor certain advantages if the debtors default and the creditor attempts to collect the whole judgment by making separate settlement arrangements to collect part of the judgment from each debtor. | Technically, creditors usually ask joint debtors to be “jointly and severally” liable (each person is responsible for the entire debt). This gives the creditor certain advantages if the debtors default and the creditor attempts to collect the whole judgment by making separate settlement arrangements to collect part of the judgment from each debtor. | ||
There are many situations in which people are asked to be joint debtors, such as when two spouses take a mortgage to buy a house, obtain a line of credit to buy a car, or request credit cards from a bank. | There are many situations in which people are asked to be joint debtors, such as when two spouses take a [[Mortgages and Foreclosure|mortgage]] to buy a house, obtain a line of credit to buy a car, or request [[Credit Cards|credit cards]] from a bank. | ||
If a borrower applies for credit and the lender demands that someone else promise to be responsible for the debt '''if''' the borrower defaults, the borrower is called the “principal debtor” and the other person is called a '''“guarantor”'''. | If a borrower applies for credit and the lender demands that someone else promise to be responsible for the debt '''if''' the borrower defaults, the borrower is called the “principal debtor” and the other person is called a '''“guarantor”'''. | ||
Most commonly, relatives or friends are asked to be a guarantor for a borrower who cannot obtain credit on the strength of their own financial record. The borrower may have a limited income or assets, or may have a poor credit history (see the section on Credit Reports and Credit Ratings). In business, individuals who are principals in a company are often asked to be guarantors for the debts of the company. | Most commonly, relatives or friends are asked to be a guarantor for a borrower who cannot obtain credit on the strength of their own financial record. The borrower may have a limited income or assets, or may have a poor credit history (see the section on [[Credit Reports and Credit Ratings]]). In business, individuals who are principals in a company are often asked to be guarantors for the debts of the company. | ||
In most instances, creditors specify which type of contract they want the parties to sign and there may be relatively little to negotiate. The law will usually, but not always, follow the express intention of the parties when considering the liability of joint debtors or guarantors. | In most instances, creditors specify which type of contract they want the parties to sign and there may be relatively little to negotiate. The law will usually, but not always, follow the express intention of the parties when considering the liability of joint debtors or guarantors. | ||