Tuesday, April 22, 2008

Cohabitation: You Co-sign for Significant Other's Car....

Let's say you co-sign for the significant other's car. You break up with significant other and leave the car with the significant other. What then happens to the loan?

Without a cohabitation agreement, the loan agreement controls the relationship of everyone to the debt. If significant other does not pay, you are both liable to see a lawsuit in your future. The one with more income will most likely see a garnishment deduction on their pay stub. Depending on the terms of the loan agreement, there may be a lawsuit against the significant other.

Frankly, this situation requires more prudence than legal documents. No amount of legal work or litigation will fix a situation where significant other is judgment proof. Better that significant other does not have a car than you have no car and a garnishment.

If you doubt significant other's ability to pay the debt, get the car in your possession. There are legal means for doing this. Which means consult a lawyer before showing up at significant other's home and driving off in the car.

Where both parties have sufficient income then there is the need for a cohabitation agreement.

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