Dear Dr. Don,
I lost my job and this has caused financial trouble for me. My aunt co-signed my student loan and I have now defaulted on the payments. Can she sue me for implied contractual indemnity? I'm worried. Any advice would be much appreciated!
-- Cherie Collegiate
In short, yes. Your aunt may have grounds to attempt to recover the payments she made to the lender on your behalf. Since I'm a financial expert, not an attorney, I will avoid going into the question of implied contractual indemnity and whether it is the basis of a potential lawsuit.
However, I did speak with an attorney. He pointed me to provisions of the Uniform Commercial Code, which provides the framework for state law around the country. Let's call it the code, for short. At issue are the legal remedies, or options, available to your aunt, who is considered the accommodation party. Because you got the help, you are the accommodated party as a result of your aunt's loan payments. Under the code, an accommodation party who pays (that's your aunt) is entitled to reimbursement from the accommodated party (that's you).
Instead of taking a look at what the law provides, how about if we think about human relationships? Rather than waiting for your aunt to go to court, can't you discuss your financial situation with her, including any plans to repay her when you find a job? Clearly, your aunt didn't expect to be left paying the loan by herself. Any reasonable person would want to be reimbursed. So, my advice doesn't concern legal or financial issues; they're more in keeping with good manners. Please help her avoid going to court to try to get her money back. That should satisfy the needs of both of you.