Guaranteeing Someone Else’s Debt

   Proverbs 6:1-4 (ESV) reads “My son, if you have put up security for your neighbor, have given your pledge for a stranger…then do this, my son, and save yourself, for you have come into the hand of your neighbor: go, hasten, and plead urgently with your neighbor, give your eyes no sleep and your eyelids no slumber; save yourself like a gazelle from the hand of the hunter…” 

   Very few of us today would consider “putting up security” (i.e., signing a guarantee) for a neighbor, let alone a stranger. But what about doing the same for a child?  
 
   Early in my legal career, a couple came to me because they had co-signed a car loan for their son who had defaulted on the payments and had not told them. The car was eventually repossessed and sold, but as is usually the case with vehicles, the sales proceeds were insufficient to pay off the loan balance. (Everyone should know as a consumer that cars nearly always lose value much more rapidly than most car loans are retired by the installments.) The son was not making any effort to pay the “deficiency”; i.e., the difference between the sales proceeds and the remaining loan balance, and now the creditor was coming after the parents because they had guaranteed the debt. 

   When I pointed this out, and told my clients this was simply a foreseeable result of the law and th ...

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