What are the rules for co-signer liability on a defaulted loan in California?

In California, a co-signer is fully and equally responsible for the entire loan amount if the primary borrower defaults. The creditor can legally pursue you for the full debt, just as if you were the primary borrower. Here is what to do if you are a co-signer on a defaulted loan: Step 1: Locate and Review Your Loan Documents Find your copy of the consumer credit contract and the separate "Notice to Cosigner" form you signed. Under California Civil Code Section 1799.91, you must have been given this specific notice explaining your obligations. The absence of this notice could be a potential defense. Step 2: Contact the Creditor Immediately Do not wait for the creditor to sue you. Call them to discuss the situation and request all communications be put in writing. Ask about options like a repayment plan, a temporary forbearance, or settling the debt for a lesser amount. Step 3: Formally Demand the Creditor Pursue the Borrower First Under California Civil Code Section 2845, you have the right as a surety (co-signer) to demand that the creditor first attempt to collect from any property or assets held by the primary borrower. Send a formal, written demand to the creditor via certified mail with a return receipt requested. This creates a record of your request. Step 4: Monitor Your Credit Reports A default will negatively impact your credit score. Obtain free copies of your credit reports from Equifax, Experian, and TransUnion through AnnualCreditReport.com. Check to ensure the defaulted loan is being reported accurately. Important considerations: Under California law (Civil Code Section 2807), your liability is immediate once the primary borrower defaults. The creditor does not have to try to collect from the primary borrower first unless you make the formal demand described in Step 3. If the primary borrower files for bankruptcy, you are still responsible for the entire debt. Note: Ignoring a defaulted loan can lead to a lawsuit against you, resulting in wage garnishment, bank account levies, and significant damage to your credit. While the demand under Section 2845 is a powerful tool, it does not guarantee the creditor will stop collection actions against you, but it can provide a strong defense in court. This is general information and does not constitute legal advice. For complex situations, especially if you have been sued or the debt is large, consult with a qualified California attorney to discuss your specific rights and options.