She adds: "We often think the reason our loved ones aren't keeping up with their responsibilities is because they can't when the truth is they won't."
Refinance on your own. As in, don't have your borrower on board. This is, of course, a big step. You're taking full ownership of the loan now.
But if the goal is to simply get lower monthly payments with a smaller interest rate so your borrower can pay off the loan more easily, sending payments to you instead of the lender, this might be a reasonable plan.
Still, there is plenty to consider. You thought the consequences of cosigning were bad? If you refinance the entire debt on your own – that house your son was buying, the credit card debt your nephew collected – that's all yours now. And while the plan may be to have your co-signer pay you back, you could be left high and dry with the debt.
On the other hand, as the sole owner, you'd have leverage to insist your tenant continue to make mortgage payments, which would be smaller and more manageable, or that he or she pay rent to you. The same goes for a car. It's yours to drive anytime you want, and you could even take possession of the vehicle and sell it, if you don't mind frosty family get-togethers.
Recoup your money another way. If this debt you've cosigned for has truly drained your bank account and you want to make your money back, Fricks-Roman has some interesting ideas.
First, with any luck, your relative or friend wants to pay you back and feels terrible about this loan gone amok. If that's the case, you could ask the borrower to direct-deposit part of his or her paycheck into your account, Fricks-Roman suggests.
But if that isn't going to happen, Fricks-Roman says less-appealing options include redoing your will and excluding the loan amount from it. That won't work for everyone, especially if you're worried about your own retirement, let alone leaving something behind in a will.
She also suggests removing your relative from your "gift list" until you've recouped your financial outlay. Of course, due to the size of some loans, that might be a lifetime.
Bankruptcy. It can be virtually impossible to get student loans discharged in a bankruptcy, but with other cosigned loans, this might be the way you'll have to go.
But there's another, more hopeful thought, Lee points out. "Even if the parents don't want to declare bankruptcy for any of the chapters – Chapter 7, Chapter 11, Chapter 13 – it can be a useful negotiation threat to gain leverage with the original lender in renegotiating a forbearance or other type of grace period to allow the child to get back on his feet, get a job and re-start making payments," Lee says.
In other words, even if you have no intention of ever going bankrupt, your borrower's lender doesn't need to know. Of course, even mentioning the word "bankruptcy" to a lender could have unforeseen consequences – the worst way to instill confidence in a financial institution is to tell them you may have to declare bankruptcy. But that's the thing about extracting yourself from a cosigned loan. There are no good solutions to pick, only the least revolting one.