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Years ago, Annie cosigned a US$10,000 motorcycle loan for a former partner who had since disappeared — and stopped making payments. She has no idea where he is or if he’s even still alive. Yet debt collectors have tracked down the one person they can find for repayment: her (1).
“He hasn’t made a payment,” she told The Ramsey Show. “I don’t care about my credit, but they keep calling.”
Cohosts Jade Warshaw and George Kamel sympathized with Annie — but they didn’t sugarcoat what she was up against. Here’s how they spelled it out for her or anyone else who’s asked to cosign a loan.
When you cosign, you own the debt
The thing about cosigning that doesn’t always sink in until it’s too late: you’re not only financially vouching for someone — you’re agreeing to cover the payments if they don’t.
The Financial Consumer Agency of Canada (FCAC) is clear on this: a cosigner — or joint borrower — is legally on the hook for the entire balance of a loan from the moment the primary borrower stops paying (2). Lenders have no obligation to track down the other person first. They can go directly to the cosigner. And that’s exactly what happened with Annie.
This is the risk that often gets overlooked when someone asks a friend or a partner to cosign. It feels like a favour, but legally, it’s a commitment. If the borrower disappears, loses their job or simply stops caring, the full balance becomes the cosigner’s problem — combined with whatever else they’re already dealing with. In this case, that means US$10,000 in new debt stacked on top of about the US$10,000 she already owes elsewhere.
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Getting out from under it
Warshaw laid it all out for Annie: “You gotta stack up the money. And If it doesn't get paid, your credit's going to get destroyed.”
And that isn’t just an expression. In Canada, a cosigned loan appears on both borrowers’ credit files with the nation's two main credit bureaus, Equifax and TransUnion. Every missed payment, every collection notice and every default hits the cosigner’s credit score just as hard as the person who walked away. And that damage can linger on your report for years.
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What makes this situation harder is that it doesn’t only affect Annie. She is now married and working again to help manage a tight household budget. A debt like this creates pressure that ripples through a relationship — that’s why Warshaw encouraged her to sit down with her husband and lay out the full financial picture so they could face it together.
Here’s how Canadian financial regulators suggest approaching a situation like Annie’s:
Treat it like your own debt — because it is
The sooner you stop waiting for the other borrower to resurface and take the wheel, the better. According to the FCAC, lenders are under no obligation to chase down the primary borrower before coming after the cosigner (3). Every month that passes without a payment can mean more fees, more interest and more damage to credit.
Understand what collectors can and can’t do
Debt collectors have rules they must follow. Under FCAC guidelines, they must identify themselves, name who they represent and state what you owe (4). They can’t threaten or harass you, and they can’t discuss your debt with anyone else: not family, friends or employers (collectors can only reach out to them to confirm your contact details). If a collector crosses those lines, you can file a complaint with the FCAC or your provincial or territorial consumer affairs office.
Pull your credit reports
Find out exactly how this debt is being reported. Both Equifax and TransUnion offer free access to your credit report — you can request yours through the Government of Canada (5). Knowing what’s on your file is the first step to understanding what you’re dealing with and what recovery might look like.
Ask about settlement
Lenders and collection agencies will sometimes negotiate, particularly on older debt. A lump-sum settlement for less than the full balance is possible in some cases — but any agreement needs to be confirmed in writing before you hand over any money. If the debt feels truly unmanageable, a Licensed Insolvency Trustee (LIT) can walk you through formal options like a consumer proposal, which can legally stop collection activity (5).
Rebuild your budget from scratch
List every essential expense — housing, food, transportation, utilities, health care — and cut anything that isn’t load-bearing. Look for any opportunity to bring in more income, like side hustles or by going back to work, like what Annie is doing. Stabilizing the household finances is what creates room to tackle the debt.
Bottom line
Cosigning a loan is one of the most underestimated financial risks out there. It feels like a show of support — but in reality, it’s a legally binding commitment that doesn’t care about the state of your relationship, or whether the other person is even around.
Before you ever put your name on the dotted line for someone else’s loan, ask yourself one question: Could I pay this off entirely on my own if it is necessary? If the answer is no, the answer to cosigning should be, too.
— with files from Melanie Huddart
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
YouTube (1); Government of Canada (2, 3, 4, 5)
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Jessica Wong is a freelance writer based in Toronto, Ontario. Her work has appeared in numerous publications including STAY Magazine: Hotel Intelligence and re:porter magazine. With a background in economic development, entrepreneurship and small business consulting, she enjoys writing about topics that help Canadians learn more about personal finance.
