Paying A High Price for Good Deeds - Co-Signing and Posting Bonds
A few years ago, a friend (I'll call him Steve) was told that he would only qualify for new car financing if he arranged for someone with better credit to co-sign the loan. Steve talked to a number of his friends and finally convinced one (let's call him Brad) to co-sign the loan. Steve drove off the lot in his dream auto and a promise to make payments for the next three years.
For the first year, everything went well. Steve made his payments and drove around in style. Brad forgot he had co-signed. Then Steve ran into some personal problems which culminated in him quitting his job and moving to parts unknown. As you guessed, Steve took the car with him.
The finance company was not concerned. They approached Brad and reminded him that he was responsible to made the payments. For the next almost two years, until the loan was fully paid, Brad faithfully paid for Steve's car. What choice did he have? If he had not, the finance company would have sued to collect and Brad probably would have lost his house. Effectively, Brad was giving Steve a very expensive gift.
Similarly, according to a story posted in the Hamilton Spectator ( http://www.thespec.com/news-story/5676158-toronto-couple-loses-40k-to-ottawa-after-bailing-out-deportee-they-barely-knew,/ ) a couple was approached by a friend about a third party (a stranger to the couple) who was in immigration detention. Although they did not know the man, they posted a $40,000 bond. As one of the conditions, they agreed that the stranger would live with them.
During a bond compliance check, the authorities found that the stranger's bedroom, in the couple's home, had only a bed and lacked any personal possessions of the stranger. The bond was forfeit and, effectively, the couple was out $40,000.
In both cases, and in many similar ones, the well-meaning individuals paid a high price for their good deeds. According to the Hamilton Spectator article last year 188 bonds totalling $588,000 were forfeited and the preceding year, 304 bonds totalling 1.8 million dollars were forfeited.
The Lesson: Think twice, then think twice again, then think twice again, before co-signing for a friend and do not co-sign for a stranger. Apply the same rule for posting a bond. How long have you known the person in question. How trustworthy are they? Have you personally witnessed them take responsibility for their actions in difficult situations and correct the situation even if it takes hard work and sacrifice? Are you personally willing to gift them the amount in question? If you cannot afford to do so, do not engage in the risky behaviour. You may end up paying a very high tuition to the University of Life for first hand knowledge of the risks involved in taking responsibility for the actions of others.
The content and the opinions expressed here is informational purposes only and does not constitute legal or professional advice. Nor does reading or commenting on it create a lawyer/client relationship with the author. I encourage you to contact me directly at adrianlawoffice@gmail.com if you have specific legal questions or concerns.
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