A cosigner is someone who qualifies for a loan for which the original borrower does not qualify, and the cosigner agrees to sign the loan along with the primary borrower. In doing so, the cosigner is taking on the same responsibility as the primary borrower, which means that if the primary borrower does not pay his bills, the cosigner is responsible for paying them. Essentially, it is as if the cosigner borrowed the money himself, which means he is subject to the same legal consequences as the borrower if the loan is not repaid.
Sued
If the original borrower does not pay her bills, the cosigner can be sued. Usually attempts will be made to collect from the original borrower, but if she will not or cannot pay, the cosigner is pursued. In addition, the cosigner's name will usually be turned over to a debt collection agency that will attempt to collect the debt before further action is taken. If the debt collection service is unsuccessful, the process of filing a suit to collect the money through the court begins. If the original borrower is broke, suing her will not help the creditor, so the cosigner most likely will be sued at the outset of the legal proceedings.
Foreclosure
A cosigner can have his property foreclosed, especially if he cosigned for the loan through a bank. If neither the original borrower nor the cosigner has enough funds to repay the loan, the bank can take whatever assets it deems necessary to repay the value of the loan. If the original borrower does not have enough assets to repay the loan and the cosigner does, the bank will foreclose on the cosigner's property to obtain its repayment. For example, if you cosign for the loan on a house and the borrower does not make payments, the creditor can foreclose on his house, and you, as the cosigner, will be billed for the unpaid debt. If you do not pay the debt, the creditor can foreclose on your home.
Garnished Wages
If payment is not received, a creditor can obtain a judgment to have a cosigner's wages garnished. If the original borrower does not have a job and therefore has no wages, he obviously cannot make his payments. Therefore, the creditor turns to the cosigner. If the cosigner refuses to make the payments but has a job, the creditor can seek a judgment from the court. If the court grants the judgment, the creditor can request that the cosigner's wages be garnished until the debt is repaid.
Ruined Credit
If the original borrower misses payments, stops making payments or submits late payments, it affects the cosigner's credit rating too. In addition, the creditor does not have to notify the cosigner of the missed or late payments, so the cosigner's credit could be adversely affected without her knowing it. Having a damaged credit rating could make it difficult for you, as the cosigner, to obtain financing or get loans at low interest rates.
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