Banking question/ co-signer related

[golfgal]

I guess Barb didn't like the idea of Rita making late payments and messing up Barb's credit, when Barb did her a favor...

Since Rita said she is going to make the payments anyway (as I agree she should) what does it matter whether she is legally responsible. The only reason to ask about that is to get out of paying, isn't it?

Team Barb!! lol

Never co-sign a loan you aren't willing to pay off.

 

[Arielle22]

This sounds like a case from Judge Judy. I happen to love judge shows. I think that Barb would have a good case against Rita in court.

Rita knew when Barb cosigned that she was legally obligating herself to pay if Rita could not. That is exactly what Barb did. If Rita didn't want Barb involved she should have paid on time.

No wonder Barb is putting her foot down with Rita, she has already showed she has problems due to the late payment calls Barb is getting.

Rita should be glad Barb isn't asking for payment in full.

If this was my BFF telling me this nonsense, I would tell her exactly how I feel. If she would screw over a relative then I would not trust her to not screw over me.

 

[WheresFigment?]

This sounds like a case from Judge Judy. I happen to love judge shows. I think that Rita would have a good case against Barb in court.

Barb knew when Rita cosigned that she was legally obligating herself to pay if Bard could not. That is exactly what Rita did. If Barb didn't want Rita involved she should have paid on time.

No wonder Rita is putting her foot down with Barb, she has already showed she has problems due to the late payment calls Rita is getting.

Barb should be glad Rita isn't asking for payment in full.

If this was my BFF telling me this nonsense, I would tell her exactly how I feel. If she would screw over a relative then I would not trust her to not screw over me.

Judge Judy wouldn't even hear this case. There's no jurisdiction.

Two parties agreed to a loan. That loan was paid by one of the parties. The terms of that loan are satisfied.

Absent a loan agreement from Barb stating that Rita must pay the amount that Barb paid (plus interest, as generally speaking a loan between two individuals must carry a certain percentage interest rate to be legally considered loaned funds for tax purposes) Barb effectively gifted that money to Rita.

She could sue her as much as she wants, but she paid off a loan that was in the name of another person, that does not by itself entitle her to have those funds be repaid. There has to be a loan agreement.

I guess she could sue for emotional distress but probably wouldn't get very far with that, either.

She can beg, cajole, harass, etc to try to get the money back but legally, there is no loan that must be repaid between Rita and Barb.

Ethically, a different story, and she can choose to pay, but there would be few if any avenues for Barb to FORCE Rita to pay.

 

[PaulaSB12]

Judge Judy wouldn't even hear this case. There's no jurisdiction.

Two parties agreed to a loan. That loan was paid by one of the parties. The terms of that loan are satisfied.

Absent a loan agreement from Barb stating that Rita must pay the amount that Barb paid (plus interest, as generally speaking a loan between two individuals must carry a certain percentage interest rate to be legally considered loaned funds for tax purposes) Barb effectively gifted that money to Rita.

She could sue her as much as she wants, but she paid off a loan that was in the name of another person, that does not by itself entitle her to have those funds be repaid. There has to be a loan agreement.

I guess she could sue for emotional distress but probably wouldn't get very far with that, either.

She can beg, cajole, harass, etc to try to get the money back but legally, there is no loan that must be repaid between Rita and Barb.

Ethically, a different story, and she can choose to pay, but there would be few if any avenues for Barb to FORCE Rita to pay.

So she should have had her credit ruined and no doubt legal action against her instead? Rita is a piece of work for even thinking of not paying her way and will not get any help in the future.

 

[WheresFigment?]

So she should have had her credit ruined and no doubt legal action against her instead? Rita is a piece of work for even thinking of not paying her way and will not get any help in the future.

I'm not saying that she should or shouldn't have done what she did, just that without making Rita sign a promissory note for the money, she has no LEGAL standing to force Rita to pay her back. That was her mistake for not doing her due diligence to find out what she would need to do to get paid.

She holds no loan between Rita and herself therefore there is no obligation of payment.

Whether Rita should MORALLY is a different question, but I seriously doubt she can pursue Rita for the funds if Rita doesn't voluntarily pay.

 

[arminnie]

Rita is a first class &^%#)(*@%$. She's your BFF? Surely you can do better than a piece of %$#&(@^& like that.

 

[Acklander]

In the first post it didn't sound like Rita wasn't planning on paying the loan, just that she didn't want Barb calling her and harassing her if she was late with the payments; it was the OP who stated that she didn't think Rita was legally required to pay the loan and maybe thought she could use that as leverage to not get the "harassing" phone calls from Barb???
Anyway, I think it's important that Barb and Rita get together and form some form of agreement that both can live with, including procedures if Rita is late with the payments. Barb did a big favor for Rita, and now Rita needs to step up to the plate. If Rita doesn't want harassing phone calls from Barb, she just needs to make sure to make payments on time.

 

[Sanchez]

Judge Judy wouldn't even hear this case. There's no jurisdiction.

Two parties agreed to a loan. That loan was paid by one of the parties. The terms of that loan are satisfied.

Absent a loan agreement from Barb stating that Rita must pay the amount that Barb paid (plus interest, as generally speaking a loan between two individuals must carry a certain percentage interest rate to be legally considered loaned funds for tax purposes) Barb effectively gifted that money to Rita.

She could sue her as much as she wants, but she paid off a loan that was in the name of another person, that does not by itself entitle her to have those funds be repaid. There has to be a loan agreement.

I guess she could sue for emotional distress but probably wouldn't get very far with that, either.

She can beg, cajole, harass, etc to try to get the money back but legally, there is no loan that must be repaid between Rita and Barb.

Ethically, a different story, and she can choose to pay, but there would be few if any avenues for Barb to FORCE Rita to pay.

Not sure where you get this from. Barb most likely has an equitable claim against Rita even if there is no written agreement regarding repayment terms.

As to jurisdiction, Judge Judy has jurisdiction over nothing as I understand it. Parties consent to have their cases (whether real or made up) heard by her - not unlike arbitration.

 

[cluvsdisney]

How is Barb threatening Rita?

I don't think there is a legal obligation between Rita & Barb since Barb acted on her own to pay off the loan. I am glad that Rita has indicated to you that she fully intends to pay the loan since Barb has now done two huge favors for Rita. In light of that, unless Barb is threatening to break Rita's legs, I think Rita just needs to accept this fact and deal with the rest of it. Or she could take out another loan to pay Barb and deal with the financial consequences on her own, ie without a co-signer.

 

[ccgirl]

And I'm sure Barb didn't like Rita trashing her credit report. Depending on how many times she was reported late; it could prevent her from not getting a mortgage, or any other loan for that matter. Did Rita think of that? Why would there be trouble if Rita pays Barb back? If she doesn't want the loan held over her head, pay it back whether it is to Barb or the bank or whatever. She should have made her payments on time and none of this would have happened. I would pay Barb back the monthly payments she was paying the bank and make sure to pay ON TIME!!

 

[dislaney]

I agree. I like how Barb is suddenly the 'bad guy' after doing two huge favors for Rita. (Co-signing the loan, then paying it off to protect Rita's credit rating.)

This! And legally- no. But should she pay the loan- Heck yes!

 

[bettymae1121]

Legally, no I don't think she has to pay it back. Morally, yes of course she should.

That said, the cousin should also back off a bit. She paid off the loan without telling her about it first and then gets all snarky when she calls and asks whats going on. Maybe if she had gone to her first and said "I'm just going to pay the bank off and you can pay me back instead, so both of our credit scores are spared if you're short money one month and have to pay late" so that everyone is on the same page, they could have avoided this little drama.

With the little the OP posted about this, maybe she has a right to be snarky about it. Maybe money is being spent on silly things and that's why she's late all the time. But now she's in a position where she HAS to be nice in order to make sure she's paid back at all. It's the chance she took when she paid off the loan. If she was worried about her credit, she should have never co-signed in the first place.

 

[cm8]

I have a question and I think I already know the answer but I just would like ot hear it form somebody else who knows more than I do about banking.

Heres what happened: My bff took out a loan about 3 years ago in the amt of 20,000.00 to pay off some hospital bills and her cousin co-signed for her. My bff found out today that the cousin paid off the loan a few days ago and didnt tell her that she was going to. "Rita" found out because she went to the bank to pay the payment today and they told her that it had been paid in full.
"Rita" called "Barb" to find out about it and "Barb" tells her that the bank had been sending her late notices, etc. in the mail and that she just wanted it "behind her".
OK here is what "Rita" asked me today. She asked me if she was still responsible to pay the loan to "Barb" instead of to the bank. "Barb" told her that she now held the bank papers and was responsible to pay her and if she didnt there would be trouble.
"Rita" told me today that she didnt ask "Barb" to pay off the loan and that she would still pay "Barb" but she didnt like the idea of "Barb" calling her and threatening her with "trouble" if she didnt.
I told "Rita" (and again thats why Im asking you guys cause Im not expert in banking) that I didnt think she was legally responsible for that loan anymore and that "Barb" couldnt hold that over her head since "Rita" didnt sign the loan agreement with her it was with the bank. Was I right?

She should pay it back on moral grounds. The next time she needs help, seems like she will be sugar honey iced tea out of luck. That is no way to treat someone that put their neck on the line for you in your time of need. My sister did that to me and that is NOT cool

Rita is a first class &^%#)(*@%$. She's your BFF? Surely you can do better than a piece of %$#&(@^& like that.

 

[Pakey]

There are tons of small claims cases on TV about this very scenario. The person who benefits from the loan is responsible for paying it. If the co-borrower has to pay it back to protect her credit, the person who received the financial benefit of the loan is still obligated to pay it.

So if Barb, takes it to Judge Judy, Rita is going to have to pay her back.

 

[snykymom]

Judge Judy wouldn't even hear this case. There's no jurisdiction.

Two parties agreed to a loan. That loan was paid by one of the parties. The terms of that loan are satisfied.

Absent a loan agreement from Barb stating that Rita must pay the amount that Barb paid (plus interest, as generally speaking a loan between two individuals must carry a certain percentage interest rate to be legally considered loaned funds for tax purposes) Barb effectively gifted that money to Rita.

She could sue her as much as she wants, but she paid off a loan that was in the name of another person, that does not by itself entitle her to have those funds be repaid. There has to be a loan agreement.

I guess she could sue for emotional distress but probably wouldn't get very far with that, either.

She can beg, cajole, harass, etc to try to get the money back but legally, there is no loan that must be repaid between Rita and Barb.

Ethically, a different story, and she can choose to pay, but there would be few if any avenues for Barb to FORCE Rita to pay.

I'm not saying that she should or shouldn't have done what she did, just that without making Rita sign a promissory note for the money, she has no LEGAL standing to force Rita to pay her back. That was her mistake for not doing her due diligence to find out what she would need to do to get paid.

She holds no loan between Rita and herself therefore there is no obligation of payment.

Whether Rita should MORALLY is a different question, but I seriously doubt she can pursue Rita for the funds if Rita doesn't voluntarily pay.

Neither of these are true. There is, at the very least, an implied contract between Rita and Barb. Do you really believe that there was no discussion between them before the loan?

If Rita said, "I can't get this loan on my own. Please co-sign and I will pay it on time," she created an offer. When Barb co-signed the loan, she accepted the offer. There is now a contract between Rita and Barb. Rita has now breached the contract by failing to pay on time, and Barb has been harmed by being required to pay a loan from which she got no benefit. An oral contract is just as enforceable as a written one (except for a few that must be in writing - this is not one of them). The problem is proving the terms of the oral contract; in this case, it wouldn't be too difficult.

By the way, while I'm sure that the BFF didn't say this to the OP, I would be willing to bet that the bank notified the cousin that if the loan were not repaid, they would take legal action against the cousin (which they are entitled to do).

There are tons of small claims cases on TV about this very scenario. The person who benefits from the loan is responsible for paying it. If the co-borrower has to pay it back to protect her credit, the person who received the financial benefit of the loan is still obligated to pay it.

So if Barb, takes it to Judge Judy, Rita is going to have to pay her back.

And, as is often shown on Judge Judy, the fact that you don't like that a creditor is bugging you for repayment is not a defense to the loan.

Bottom line (and yes, I am a lawyer) - Rita owes Barb the money for the loan, both legally and morally.

 

[ameraumi]

Judge Judy wouldn't even hear this case. There's no jurisdiction.

Two parties agreed to a loan. That loan was paid by one of the parties. The terms of that loan are satisfied.

Absent a loan agreement from Barb stating that Rita must pay the amount that Barb paid (plus interest, as generally speaking a loan between two individuals must carry a certain percentage interest rate to be legally considered loaned funds for tax purposes) Barb effectively gifted that money to Rita.

She could sue her as much as she wants, but she paid off a loan that was in the name of another person, that does not by itself entitle her to have those funds be repaid. There has to be a loan agreement.

I guess she could sue for emotional distress but probably wouldn't get very far with that, either.

She can beg, cajole, harass, etc to try to get the money back but legally, there is no loan that must be repaid between Rita and Barb.

Ethically, a different story, and she can choose to pay, but there would be few if any avenues for Barb to FORCE Rita to pay.

I was going to say the same thing. We just discussed this scenario in my Business Law class. The above would be correct - legally. Now ethically is a different story.

 

[allyphoe]

For all of you saying that there's no obligation to repay the co-signer, I suggest you Google "right of subrogation" and "right of indemnity."

generally speaking a loan between two individuals must carry a certain percentage interest rate to be legally considered loaned funds for tax purposes

Got substantial authority for that? Neither the imputed interest rules nor anything else in the Internal Revenue Code are determinative of whether a loan exists; they merely address the tax treatment of below-market loans. Absent donative intent - and the OP has posted nothing that indicates donative intent - there is no gift here.

 

[disney11fan]

Never sign as a co-signer on a loan. They don't pay they will come after you..bet on it. I hope they pay back the co-signer asap.

The credit of the co-signer would go down the tubes..and the way things are today...you don't want that.

It will hurt you trying to get a job,insurance and just about anything else.

 

[sparklynails23]

Although there doesn't seem to be a contract at this point, I wouldn't be surprised if Barb could get a judgement against Rita for the balance of the loan, plus damages for Barb's ruined credit. Rita should take out a loan on her own and pay back Barb to "get her off her back," or you could co-sign on a loan for your bff and get Barb off of Rita's back.