Big Stupid Tax

Brian co-signed a small-business loan with his brother-in-law. Now his brother-in-law is getting divorced, and Brian doesn't know what the balance of the loan is or what to do about it.

QUESTION: Brian in Las Vegas co-signed a small-business loan with his brother-in-law. Now his brother-in-law is getting divorced, and Brian doesn’t know what the balance of the loan is or what to do about it. Dave says Brian’s going to end up paying this loan off.

ANSWER: You’re going to pay it. When I do something stupid that costs me money, I call it stupid tax. If there is no money to get from him or from this situation, and you’re on this note, they are going to come to you. You’re going to pay it, or they will sue you.

Since you have $50,000 in the bank, you are probably going to write a check and pay it. You can go after your brother-in-law, but it doesn’t sound like he’s got anything, including character. The chances of him feeling bad about this and paying you off when he’s willing to mess his own wife over is about zero.

I wish I had better news for you, but you are 100% liable on this note. When he doesn’t pay it, they’re going to come to you. You’re going to pay it, and they only way they will take less on the note is if they think they’re not going to get paid, which would be because it’s behind.

Every time the loan is not paid on time, it messes up your credit. This is a very expensive lesson. Never co-sign under any circumstances. I will never co-sign a note ever. Now you are learning this lesson, and it’s costing you $40,000. That’s heavy tuition to the school of life, but I’m afraid that’s where you are. I don’t know any way you can get out of it.

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