Love Hurts, Debt Hurts MorePosted on by Apolonia DSa
Recently, the Toronto Star ran a series of articles about Canadian individuals who, while on their vacations in Cuba, Dominican Republic etc. met someone, fell in love, married, and then sponsored their new spouses to Canada.
I recently met with a debtor who found herself in the same situation. Mary (not her real name) was celebrating her 25th birthday with three of her girlfriends in the Dominican Republic when she met Julio (not his real name) and it was love at first sight. Mary made several trips to visit Julio, bought both him and his extended family gifts, and was sending him money on a monthly basis. Most of this was financed on her credit cards and line of credit. Mary also ran up a large debt to the telephone company for her long-distance telephone conversations with Julio – sometimes two or three times a day.
When Julio arrived in Canada, and was still looking for a job three months later, he suggested to Mary that rather than having to ask her for money for his cigarettes, personal expenses, etc. every day, he should try and establish his own credit which he would pay off once he started working.
While Julio had no credit history in Canada, Mary had a great relationship with her bank, and they agreed to give Julio a credit card and a line of credit on the condition that Mary co-sign for both.
Mary and Julio’s relationship quickly deteriorated and within the year, Julio had left. After he left, Mary contacted the bank and was surprised to discover that, within the short period of their marriage, Julio had run up the credit card and the line of credit to their maximum limits. Mary asked the bank to cancel both the credit card and the line of credit accounts, but, since both were issued in Julio’s name and Mary was just the co-signor/guarantor, she was not able to cancel them.
The inevitable happened: Julio did not make any payments against either the credit card debt or the line of credit and the bank and their collection agents began their collection process against Mary.
Co-signing or guaranteeing debts for spouses, relatives, and friends is a very generous undertaking. However, you should be aware that if the borrower does not pay their debts or is late in paying the debt each month, the lending institution can and will pursue you for payments of these debts.
In most cases, the reason that the lending institution requires a co-signor or guarantor is because the borrower does not qualify for the loan on their own.
Furthermore, when you co-sign or guarantee a debt for someone, this information appears on both the borrower’s credit file and your credit file, and any negative reporting by the lending institution will impact your credit file, too.
Unfortunately for Mary, this relationship cost her more than just a broken heart.
But, after her free, no-obligation consultation with me at BDO – Brampton, we put together a consumer proposal which was accepted by her creditors. Mary is now well on her way towards removing all traces of Julio from her emotional life AND her credit report.
BDO – a partnership you can trust.