Dear Mary: About ten years ago my daughter co-signed 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 come 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 non-payment, the lender has ten years from that date to try and collect. Then the debt can be reported to the credit bureaus for up to seven years after it is “written off” as uncollectible, which is only slightly better than “bankruptcy” on the list of bad things on her 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 co-signing for a loan. Do not do it. Never, ever and I mean under any circumstance.
If anyone (child, parent, brother, sister, cousin, aunt, 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 non-professional 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.
Whenever you co-sign on a loan by adding your signature to the promissory note, you are entering into 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.
If you really want to help and you believe in this person’s ability to repay a loan, wonderful. Do it. But instead of co-signing on a loan, you become the lender. You heard me. Just hand it over now and save yourself all that hassle later. What? You can’t afford to do that? Then you cannot afford to co-sign either.
So are we clear on this? Never, ever co-sign for a loan. Hear?