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Ten Years Ago I Guaranteed a Loan For a Friend. Now They Are Coming After Me. – John

“Dear Steve,

I’m 65 yrs old. Sold my business in ’98. Have not worked since. Have 2 homes and travel a lot. That about sums it up. Signed a guarantee for a college Friend in 1999 for a business venture. Credit limit $6-8-10,000(??). Never ever used the card; never got a statement or call telling me the credit limit/balance was going up. Still have the original card w/ the white strip w/the # to call for authorization is still attached to the card. Kept up with the Friend for a few years and finally stopped worrying about it.

This Jan ’09 it STARTED. You probably can guess how many calls, letters, and e-mails I have gotten. I refuse to settle or pay anything to them unless my credit is cleared of their fillings. I refuse to pay 28% interest. I borrow money @ prime. They can NOT provide me the Documents I signed. It started w/Wachovia Bank….. Citi-Bank now owns the debt but has turned it over to a collection agency. The current balance is $61,000. It was $51t in Jan ’09.

The friend has no net worth. I wish he had kept me up but I’m just as guilty for not keeping an eye on this. I will have compassion and forgive him.

Going thru this I started in Feb ’09 w/my ethics/moral value that I owed them the last 18 months of purchases + 8% interest and they would clear my credit report. That amount would be $46t paid over 5 yrs at 4% interest (at that time the balance was $51t). I thought my debate would be over the 8% interest and it would end up being 15-18%. Not so! They would not clear my credit under any circumstances. Having experienced this; going thru all the harassment (be it polite except one call); calling my children and neighbors; I’m now willing to let a Judge decide what is best. My lawyer and account say to wait it out and go to Court. The lawyer says with out the signed document they have no case? I am willing to pay something and I fill I should but not the $61t. So, to the question.

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1- Is it better to have on one’s credit reports “Settled; not paid in full” or have a Judge decide how much should be paid?
2- When the Court rules does the previous fillings on my credit go away?
3-Does the Court ruling show up on my credit reports?


Dear John,

Yes, it does certainly sound like you guaranteed or cosigned for a line of credit or card for a “friend.” The problem when you do this is you make yourself personally liable for the entire debt the other person runs up. And with high interest rates and fees that number can grow quickly. Heck, at a penalty rate of 29% on the balance a $51,000 balance can easily ride to $61,000 in less than a year.

Part of the problem with the current owner of the debt is that all credit bureau agreements prohibit a lender from reporting anything about the account other than the truth. For example, they could not change the past negative history on the debt even if you paid the debt in full.

If you can come to an agreement to repay the debt for an amount less than you owe the balance paid will show as paid in full on the credit report but the balance written off will show as a bad debt and that amount will be reported to the IRS on a 1099-C and you will have to pay income tax on the forgiven amount. And unless you get specific documentation saying you are not responsible for the amount written off the lender can come back latter to collect that.

The collection activity should remain on your credit report for seven years.

Court activity will appear in the public records section of your credit report indefinitely and it will hurt your credit score. But then again so will the negative entry about the amount written off.

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The lawyer is right that unless they can provide evidence of your responsibility they can’t go after you. But remember this, the judge is not there to decide what is fair. The judge will make a determination about your responsibility as a matter of law. Meaning, the the lender can prove you are responsible, it is all your debt. The lender had no responsibility to notify you of the usage or balance. You were not the loan holder, just the guy that personally guaranteed it.

Since you have a lawyer I would ask the lawyer to step in and get involved in this situation. Have the lawyer advise the lender they are now representing you and to not call you anymore about this debt. The lawyer can also as for documentation prior to the court date.

Of course the big lesson to be learned here is not to guarantee a loan for anyone else ever again.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.


P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • Thanks Steve,
    Did not know that if I settled they could still come back later and start all over. That was good advise! Also I was thinking a Judge would be fair. Again, good advise!
    What I didn’t understand was in paragragh 6: :Meaning, the the lender can prove……” I assume one of the “the”s was to be an “if”. So, my question is: does the Judge need a copy of my signature on a document as proof in court? What constitutes proof?
    Don’t think I shared that I’m now in the hands of the collection agency. I’ve only got a few days left b/4 they file. Does this make any difference?
    Again, thanks for your help. You made 2 really good points.
    Have not read the 6 ways to help but I will. The US of A is going thru some crazy things and difficult times.
    And a big hug to you,

    • John,

      You’ll have to talk to your attorney about constitutes proof in your state.

      I don’t think it matters that the case is days away, still time for you to retain a lawyer to represent you. In a case this big, it is a wise and sound investment.


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