Dont ever co-sign a car loan with someone, including your children

Attorney Tom Olsen: Let's start with some common advice that you and I always give our clients, and that is, don't ever co-sign for somebody's car loan. Whether either your sibling, or your child, or your parent, or your friend, or your boyfriend, or your girlfriend, or your best friend, flat out just don't do it.

Attorney Chris Merrill: Exactly.

Tom: It's only going to come back to burn you. With that said, if somebody says, "Tom, you know what, I'm going to ignore your advice, I'm going to co-sign my name on my boyfriend's car loan," well, it would be to your advantage to put your name on that car, on the title to that car. Why? Because if your boyfriend quits making the payments on that car, you could go grab the car because your name's on a title as well.

Then you could take charge of that car and either start making the payments and bring them current, or otherwise sell that car and pay off that car loan and be done with it. What's the other option is that girlfriend co-signs the car loan for the boyfriend and her name is not on the title. Now, the boyfriend quits making payments and the girlfriend calls us and says, "Tom, what can we do? What can I do?" The answer is nothing-

Chris: Nothing.

Tom: -because your name's not even on the car title. You've got to sit back and take it.

Chris: That's in other words, the worst scenario.

Tom Olsen: Worst case scenario. If you have put your-- co-signed a loan with somebody on a car title, you might as well better put your name on that title too so you can go get that car if you have to.

Chris: At least it gives you some leverage versus no leverage. [chuckles] I think that's really the lesson to be learned here. More than ever, we know that people are, in particular boyfriend-girlfriend, there's not a legal obligation between a boyfriend and a girlfriend. Whether it is, it's a very big obligation to co-sign for anybody, but in particular where you don't have a legal obligation between each other, so as a car which is a big purchase, as well as we know that there are more and more boyfriend-girlfriends co-signing together on a home, so same.

Tom: That reminds me of a few years ago that I had a lady and she had a boyfriend and while things were great between them, she went and co-signed for his $250,000 motor home. Oh boy.

Chris: Yes.

Tom: Yikes. Ooh. That's a big old whopping payment that she's on the hook for.

Chris: Exactly. I remember. Yes. I remember that client and you sharing with me, but I think also too, that brings to point because we've had some more calls regarding this during COVID when people were very anxious and they started buying motor homes and boats and other vehicles like camper vehicles or things like that which are of pretty significant purchase. These are situations where people just jumped right in together buying these things and now they're on the hook and they may not be together anymore.

Tom: Chrissy, I've been a lawyer for 40 years and I cannot tell you how many times people have come to me with this. "Tom, I co-signed a loan for my grandchild, my spouse, my boyfriend, my girlfriend, my parents, my grandparents, my best friend and they quit making payments." Of course we always hear about the problems, but I'm saying I hear that problem enough times that I can flat out tell people don't do it. Guess what? For our kids, we've never co-signed anything for them.

Chris: No, because we follow really the same rules that we share with everybody else and we say, don't do it.

Tom: You know what, we've been telling our kids that for so many years they haven't even bothered asking us.

Chris: No.

Tom: We cut them off at the pass on that one.

Chris: Absolutely.

Tom: Which I think was well done. By the way, when people sometimes come and say, "Hey, I'm cutting out one of my kids and my grandkids for my will," guess why? Often common reason is because I co-signed a loan for them and they didn't pay it.

Chris: Correct.

Tom: Hey, folks, my name is Tom Olsen, the name of the show is Olsen On Law. We're going to take a break. We'll be back in just a few minutes.

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