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My friend bought a bed online and needed help financing it. I agreed under the pretense that I was a "co-signer" on the loan. Turns out I was the actual person taking out the loan. At this time, we're great friends. She said she would make her payments. She made a couple successful ones, and then stopped paying all together. I wasn't notified until it was 3 month delinquent (since that notification was by mail to my address while other notifications went directly to her email). I've made her aware that I know she's very late and I've given her deadlines on when I need payments by to try & get caught up. No responses.I'm prepared to pay for the bed but can I take it back without out her consent or her agreeing to that?

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    Which is more important: the bed or your friendship? – RonJohn Aug 1 '18 at 17:48
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    If the loan is still delinquent, it's your credit rating that's getting killed. Pay it off, and then (try to) get the money back from her. – RonJohn Aug 1 '18 at 17:49
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When you agree to co-sign a loan, you are agreeing to make any payments that the borrower fails to make. And you do not get any claim against the money borrowed or anything bought with it. That's how co-signing works.

So whether co-signer or borrower, you agreed to make any payments she failed to make, and you agreed that the bed would be hers.

  • I borrowed the loan for her bed, which she agreed to pay. Since she failed to pay, shouldn't the item be taken back? Like a contract void or repossession of some sort? Except to me and not the actual company? – Justina Aug 1 '18 at 18:00
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    No, at least not unless you two explicitly agreed to that. You agreed to co-sign the loan in exchange for her agreeing to pay the loan. There's no reason that should automatically give you a claim against the bed if she doesn't pay. – David Schwartz Aug 1 '18 at 18:04
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    You can ask for the bed back, and she may agree. You can also try to recover money from her in court, but it is very unlikely that you will succeed. – DJClayworth Aug 1 '18 at 21:29
  • That's just false. A co-signer doesn't have any claim against the merchant, but they do against the borrower. By co-signing, you've effectively borrowing money from the lender and then lending it to the "real" borrower. The borrower owes you the money. – Acccumulation Aug 3 '18 at 21:31
  • @Acccumulation What are you claiming is false? – David Schwartz Aug 3 '18 at 21:43
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No. You agreed to cosign for the loan, which means you are fully responsible for the loan. But it does not (generally) give you a right to the bed.

Note that you seem to misunderstand what "co-signing" is. Co-signing a loan always means you are responsible for the loan. Essentially, the loan company thought your friend wasn't sufficiently financially responsible and you said, "I think she is and if she isn't, I'm willing to have it affect my credit and I am willing to pay the full balance of the loan". Turns out, the loan company was right, she wasn't sufficiently financially responsible and now you are on the hook. A costly lesson.

You do have the option of suing her. In most jurisdictions, small claims court would be a good choice. However, given that she isn't paying for the mattress, it's unlikely you'd be able to collect a judgement against her.

  • +1 for mentioning small claims court – ventsyv Aug 1 '18 at 17:53
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    The loan is in my name, alone. – Justina Aug 1 '18 at 17:56
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    @Justina If the loan is in your name only, then why on Earth were the bills sent to a third party? – a CVn Aug 2 '18 at 14:37
  • @MichaelKjörling I didn't find out it the loan was only in my name, until the letter showed up in my mailbox. After which I took her contact information off and contacted her about the loan more often since I knew exactly what was going on. – Justina Aug 3 '18 at 15:32
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Keep in mind that even if you were a co-signer as you believed, the loan would still be your responsibility and the bed would be her property. I think the only way you could take the bed would be if you had made a loan to her with the bed as collateral, or otherwise had a contract that you could take the bed if she didn't pay.

Effectively, you made a gift to her when you agreed to sign for the loan. To get anything back, you'd have to pursue her legally (small claims?) if you believe that there was a contract between the two of you, or that she defrauded you.

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No. You've taken an obligation to repay the loan if your friend fails to do so, what's not clear is what kind of agreement is between you and your friend.

In any case, unless you have it in writing (or had a verbal agreement in front of witnesses), it's not enforceable.

Even if you could take possession of the bed (I assume you don't have access to your friend's house), technically it's not yours to return.

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As others have said, the short answer is probably "no".

What contracts do you have with your friend and with the loan company?

Loaning somebody money, or agreeing to pay somebody else's loan, doesn't of itself give you any right to any property. There has to be a contract specifically giving you such rights. The whole point of a contract is that it spells out exactly what everybody's rights and responsibilities are. If you could say, "Well, yeah, that wasn't in the contract, but I think it's only fair", then a contract would be worthless. It could always be superseded by somebody's subjective idea of what is "fair".

I have no idea what sort of agreement you had with your friend. I'm guessing you don't have a signed, written agreement. In principle a verbal contract is just as binding as a written contract, but in practice it's difficult to enforce because unless there were witnesses with good memories, there's no way to prove what was said.

You might possibly be able to sue her for the money. In practice, if she can't afford to pay the loan, she presumably can't afford to pay you. You could demand she give you the bed. A court might or might not side with you on that.

I think it's fair to assume that taking her to court would end your friendship. Is it worth it?

Personally I tend to avoid getting into business deals with friends precisely because of this problem: If anything goes wrong, I could lose both the money AND a friendship. It can be a tough call.

In the future, I would advise not co-signing a loan (or being the sole signer on a loan) unless you are prepared to lose all the money. My sister recently asked to borrow several thousand dollars from me for a business venture. I just gave her the money with zero expectation of ever being repaid. And her business went nowhere and I sincerely doubt I will ever get that money back. But it's not a fight because I wouldn't have given her the money without deciding up front that it was a gift and not a loan.

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    "I think it's fair to assume that taking her to court would end your friendship. Is it worth it?" Not doing that will do the same. – glglgl Aug 3 '18 at 15:22
  • @glglgl Our friendship ended for another reason which is why I have not received any responses from her. Even after she claimed that she would get caught up & continue making payments. – Justina Aug 3 '18 at 15:37

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