Dear Mary: About 10 years ago, my daughter cosigned on an automobile loan for a friend. The “friend” skipped out on payments and left town, so they came after my daughter for payment. All these years later, she still has not paid anything on the loan. Is there a time limit for how long they can keep after her to pay? Is there anything that she can do to get out from under this problem? Thanks. — Jeanie H., North Carolina
Dear Jeanie: I am not an attorney, so I cannot offer any kind of legal advice. That being said, my understanding is that in North Carolina a debt that is secured by a promissory note (like a car loan) does not have a statute of limitations (SOL), per se. Once the lender files suit and receives a judgment against the borrower (your daughter) for nonpayment, the lender has 10 years from that date to try and collect. Even at the end of 10 years, the debt can continue to be reported to the credit bureaus as “written off” for another seven years, which is just a few notches above “bankruptcy” on the list of bad things on a credit report.
Your daughter should go to AnnualCreditReport.com to order all three of her credit reports, one each from Experian, EquiFax and TransUnion. She is entitled to one free report from each bureau, every 12 months. If a judgment has been filed against her, the reports will show those details, including a date the judgment was filed.
This is a terrible tragedy, and I am so sorry that she has gone through this ordeal.
Now, even though you didn’t ask, I’m going to give you, your daughter and everyone reading this my standard lecture on cosigning for a loan. Do not do it. Never, ever, and I mean under any circumstance.
If anyone (child, parent, cousin, uncle, employer, employee, friend or foe) cannot secure a loan on his or her own, that means the bank sees this person as too risky. So why on earth would you, a nonprofessional person with limited resources, step up and agree to take on a level of risk that even a big bank would not? You shouldn’t. Never, ever, which I believe I just said, but I need to keep saying it.
If you really want to help, wonderful. Do it. But instead of cosigning on a loan, give him or her the money. You heard me. Just hand it over now, and save yourself all that hassle with the lender later. What? You can’t afford to do that? Then you cannot afford to cosign, either.
Whenever you cosign on a loan, you are entering a legal contract promising the lender that if the borrower defaults, you will gladly pay the loan on his or her behalf no matter how much it is or how long it takes.
So, are we clear on this? Never, ever cosign for a loan. Hear?
Do you have a question for Mary? Email her at firstname.lastname@example.org, or write to Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.
Mary Hunt is founder of www.DebtProofLiving.com, a personal finance member website and the author of “7 Money Rules for Life,” released in 2012.
To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.