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Cosigning for in-laws in bankruptcy

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  • Cosigning for in-laws in bankruptcy

    Hello.

    I have the pleasure of having some very nice in-laws but with poor financial decision making skills.  Both still work and are in the process of going through bankruptcy.  The reason was for bankruptcy was they took too much debt on for their children's education.  They are in the process of selling their old home which needed a lot of work and want to rent another home (at a lower price than their previous mortgage) to live in.  However due to the bankruptcy they would not likely pass a credit check.  My wife (also a physician) and I (a resident) would like to cosign for them so they can find a reasonable place to live.  However, I am a bit concerned about cosigning as it opens us up to financial risks.  I've decided to have only one of us sign to protect our credit as a couple.  I was wondering if there were any other suggestions others might have as to best protect my wife and I.  Thank you for any input which you can offer.

  • #2
    Would you be OK with paying the rent + utilities if they couldn't for a year term or more?

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    • #3
      I certainly wouldn't be excited about it.  I do feel we somewhat owe them considering they did cover my wife's undergraduate education.

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      • #4
        They are bankrupt solely from education debt? That doesn't sound feasible. I would definitely want to dig deeper into their finances before you help them. There must be other issues going on, and if they don't address their total financial health, they are doomed to repeat.

        Also, I would think they might be able to rent something without you cosigning. Another way you could help would be to offer to give them a cash gift for their deposit. That way you are off the hook on the lease.

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        • #5




          They are bankrupt solely from education debt? That doesn’t sound feasible. I would definitely want to dig deeper into their finances before you help them. There must be other issues going on, and if they don’t address their total financial health, they are doomed to repeat.

          Also, I would think they might be able to rent something without you cosigning. Another way you could help would be to offer to give them a cash gift for their deposit. That way you are off the hook on the lease.
          Click to expand...


          My thoughts too - doesn't add up.

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          • #6




            Would you be OK with paying the rent + utilities if they couldn’t for a year term or more?
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            I think this is the only question you have to answer; it's the only financial risk in my mind. And it may only be the rent unless the utilities are through the lease and not directly from the utility company (unless you also co-sign for the utility companies).

            But if you don't mind sharing, where did your wife and siblings go to school? How many kids? What do her parents do for a living? 6 kids to Ivy League schools on teachers' salaries (without financial assistance for some reason)? I imagine there were factors beyond just paying for their kids' college but it's your call whether you factor their money management into your decision to cosign.

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            • #7
              I would not co-sign. If needed, you can give them a year's worth of rent (nobody cares about your credit score when you pay the whole year's rent in advance) and tell them they can pay it forward to your grandkids if they are able to. But I would consider that money gone. Better to give it away up front. At least then you know exactly how much you're out and you're less likely to commit to an amount you cannot afford.

              There are very few situations where I would recommend you co-sign for somebody.
              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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              • #8




                I would not co-sign. If needed, you can give them a year’s worth of rent (nobody cares about your credit score when you pay the whole year’s rent in advance) and tell them they can pay it forward to your grandkids if they are able to. But I would consider that money gone. Better to give it away up front. At least then you know exactly how much you’re out and you’re less likely to commit to an amount you cannot afford.

                There are very few situations where I would recommend you co-sign for somebody.
                Click to expand...


                Great advice there.  I can imagine some kind of worst-case scenario (like the rental burns down) and the insurance company (or landlord) goes after you since you co-signed, or a slip/fall and personal injury, etc.  Far-fetched, but I'm paranoid.

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                • #9




                  I would not co-sign. If needed, you can give them a year’s worth of rent (nobody cares about your credit score when you pay the whole year’s rent in advance) and tell them they can pay it forward to your grandkids if they are able to. But I would consider that money gone. Better to give it away up front. At least then you know exactly how much you’re out and you’re less likely to commit to an amount you cannot afford.

                  There are very few situations where I would recommend you co-sign for somebody.
                  Click to expand...


                  I would go further and state that all children who got the free education chip in equally for the year's worth of rent. Not just you and your wife.

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                  • #10
                    I guess we all want to help others.  I once cosigned a car loan for my office manager.  She was late for one payment and it showed on my credit report.  I was not trying to buy anything so it did not effect me at all.  Lesson learned.

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                    • #11
                      Don't cosign.  Help all you want, but don't cosign.  Student loans are generally not dischargeable in bankruptcy.  So, it isn't really clear how much bankruptcy will change their finances from your comment.  Since they are so nice and poor at finances, do you need to be concerned there may be more to this story than just the student debt?  I would be.  Good luck.

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                      • #12
                        Credit wise, after a bankruptcy there are a surprising amount of creditors who will be willing to offer them credit.  Why?  Because you can't sue for bankruptcy again for a very long time.  So while many landlords will need a cosigner, they may be able to find one who does not.

                        Also, if they're coming out of bankruptcy *and* both still work, they should soon be sitting pretty with a lot of income and much smaller debt.  They should be able to save up a couple few months' rent in no time at all.  If a tenant is willing to put up a couple months rent in advance, you can avoid the hassle of dealing with credit.

                        I'm sure they're putting a lot of guilt on your wife and her siblings for college, but they should be able to take care of themselves at this point.  That's the magic of bankruptcy.

                         




                        I would not co-sign. If needed, you can give them a year’s worth of rent (nobody cares about your credit score when you pay the whole year’s rent in advance) and tell them they can pay it forward to your grandkids if they are able to. But I would consider that money gone. Better to give it away up front. At least then you know exactly how much you’re out and you’re less likely to commit to an amount you cannot afford.

                        There are very few situations where I would recommend you co-sign for somebody.
                        Click to expand...


                        Only thing I would be wary of gifting them money would be that you open the door for many, many more gifts in the future.  They will grow accustomed to living rent-free for a year, living even more irresponsibly than before, and when that 13th month rolls around they'll be crying that they can't afford their rent.  By then you might both be attendings and it'll be even more difficult to say no.  Next thing you know, you've signed yourselves up for your own little student loan payment for the rest of their lives, and you would have wished you just paid them back for that undergrad debt and wiped away your guilt.

                         

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