How Do I Get Repaid When I Cosign a Loan That Goes Into Default

Full question:

When I was married to his mother from 2000-2005, I became a co-signor to my step son's several private college loans with totaling approximately $125,000. He graduated 3 years ago and since has barely made payments. He has been late so many times that my credit has suffered and now it looks like he will default. I have the funds to keep current but I do not feel I will be paid back. His mother says she will sign a promissory note for any and all payments I am forced to make on his behalf. I would like that secured with a lean on her house. However, times being what they are, I think she owes more on the house than she has in equity. Do you have any suggestions how I may protect myself from losing $125,000? The son lives in California and his mother lives in Georgia. The bank is unwilling to exchange her for me as a consignor. I need an answer within a couple of days please.

• Category: Debts and Credit
• Subcategory: Cosigning
• Date: 04/07/2025
• State: Georgia

Answer:

It may be possible to sue a primary borrower, such as when there was an agreement with the cosigner to repay the money, and what evidence exists regarding the agreements. It is always best to get a written agreement from the borrower that the cosignor will be repaid if the borrower defaults. If you obtain a promissory note and ultimately get a judgment for failure to pay the promissory note, it is possible to use the unpaid judgment to place a judgment lien on property, such as real property, bank accounts, vehicles, or other assets, or have wages garnished.

A promissory note may be secured or unsecured. When it is secured, it means that property, called collateral, may be taken by the lender if the borrower fails to pay the loan payment. If the debtor files bankruptcy, the lender may be able to recover the value of the loan by taking possession of the specified collateral instead of receiving only a portion of the borrowers property after it is divided among all creditors. Collateral may be many different types of property, such as shares of stock of a company, inventory, accounts receivable, etc.

A promissory note may provide for payments to be made in installments or in a lump sum. The terms may provide for a series of smaller payments at the beginning of the loan period and a larger balloon payment at the end of the loan period. The option for a confessed judgment agreement, also called a cognovit note, may also be included. A confessed judgment agreement requires the debtor not to claim defenses and agree to have a judgment entered against him if he fails to pay and the matter is taken to court. After a judgment in the creditor's favor, a lien may be created on the property securing the loan. A request for a judgment lien is filed in court, the lirn itself is filed with the county recorder's office where the property is located.

A lien is a claim to property for the payment of a debt, typically one connected to the property. It is the right to retain the lawful possession of the property of another until the owner fulfills a legal duty to the person holding the property. The right of lien generally arises by operation of law, but in some cases it is created by express contract. There are two kinds of liens; particular and general. When a person claims a right to retain property, due to money or labor invested in that property, it is a particular lien. Liens may arise by express contract; from implied contract, as from general or particular usage of trade; or by legal relation between the parties, such as created with common carriers and inn keepers. To create a valid lien, it is essential that the party claiming a lien should have the absolute property or ownership of the thing or, at least, a right to vest it; that the party claiming the lien should have an actual or constructive, possession, with the assent of the party against whom the claim is made; that the lien should arise upon an agreement, express or implied and not be for a limited or specific purpose that contradicts the express terms or the clear, intent of the contract. In certain circumstances, the lien holder may foreclose on the property if the debt is not paid in full. Liens can generally be removed by the payment of the amount owed. This payment can occur at any time up to and including the stage at which the closing documents for the sale of the property are signed.

A judgment lien is created when a court grants a creditor an interest in the debtor's property, based upon a court judgment. A judgment lien can be filed if an actual judgment in a lawsuit is obtained from a court. Such cases include failure to pay a debt, including credit cards, bank loans, or deficiency judgments on repossessed vehicles. In some circumstances, judgments can be enforced by sale of property until the amount due is satisfied. A plaintiff who obtains a monetary judgment is termed a "judgment creditor." The defendant becomes a "judgment debtor." secure payment of the claim to the injured party. After the judgment creditor places a lien upon the attached property, the next step in the collection process is to conduct a sale of the attached property to satisfy the judgment debt. If a lien were placed on a home, the judgment creditor would then seek to foreclose on the property, in the same way a mortgage holder such as a bank would foreclose if it were not paid. Laws regarding judgment liens vary by jurisdiction, so local laws should be consulted for specific requirements.