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Co-Signers Beware: Judgment May Be Entered Against You Even if You're Not Served

A co-signer, or co-borrower, is usually a "joint obligor," which means that both borrowers have equal responsibility to repay the full amount of the loan. The lender can pursue legal remedies against one or both borrowers for the full amount.

New York Law[1] has an additional benefit for the lender. As long as all joint obligors are named in the lawsuit, but only one is properly served, the judgment may be entered against all joint obligors.

But enforcement of such a judgment is a different matter. As to individually held property, the judgment may not be enforced against the joint-obligor who was not served. The judgment may be enforced, however, against the jointly-owned property (if any) of all joint obligors, as long as one was served.

The subsequent section of the code, CPLR § 1502, comes along and permits a subsequent action against the obligor not served to enable the creditor to reach that obligor's individually held property.

As with any contract, the decision to co-sign is a personal and business decision, made by the cosigner after considered judgment. Even after a co-signer's death, that obligation transfers to his or her estate.

If you are being pursued as a co-signer and need help, contact us.

[1] CPLR § 1501. This is NEW YORK law. Please consult your individual state's laws.