Many Texans agree to co-sign a loan for a child, friend, or family member without fully understanding the legal consequences. Others believe that a lender must always sue the primary borrower first before pursuing the cosigner. In most situations, that is simply not true.

Whether you are the borrower, the cosigner, or the lender, understanding Texas law can help you avoid expensive mistakes.

What Is a Cosigner?

A cosigner is someone who agrees to become legally responsible for repayment of another person's debt if the borrower fails to pay.

Unlike a reference or character witness, a cosigner signs the loan documents and generally becomes contractually liable for the debt according to the terms of the agreement.

Does the Lender Have to Sue the Borrower First?

Usually, no.

Most promissory notes make the borrower and cosigner jointly and severally liable. This generally allows the lender to pursue either party for the full amount owed without first exhausting collection efforts against the other.

The precise language of the contract matters, but many cosigners are surprised to learn they can become the primary target of collection efforts.

What Debt Collectors Cannot Do

Even if a debt is valid, Texas law limits the methods that debt collectors may use.

For example, Texas Finance Code § 392.301(a) provides in part:

"In debt collection, a debt collector may not use threats, coercion, or attempts to coerce..."

The statute then lists numerous prohibited practices, including threatening unlawful actions or threatening criminal prosecution when such action is not legally authorized.

The existence of a legitimate debt does not give a collector permission to violate the Texas Debt Collection Act.

Can a Cosigner Be Garnished?

Texas offers unusually strong protections for wages.

Generally speaking, Texas creditors cannot garnish ordinary wages to satisfy most consumer debts, although important exceptions exist under federal and state law, such as child support, certain federal obligations, and some tax liabilities.

However, creditors who obtain a judgment may still pursue other collection remedies that are available under Texas law.

What Happens If the Cosigner Pays?

If a cosigner pays the debt, that does not necessarily end the matter between the cosigner and the original borrower.

Depending upon the circumstances, the cosigner may have legal claims against the borrower for reimbursement or indemnity based upon the parties' agreement or applicable law.

Those claims often become separate civil lawsuits.

Common Misconceptions

Many people incorrectly believe:

• The lender must sue the borrower before suing the cosigner.
• Cosigning only affects your credit score.
• Family relationships prevent lawsuits.
• A verbal promise by the borrower guarantees reimbursement.
• The lender cannot pursue the cosigner if the borrower declares bankruptcy.

Each of these statements may be incorrect depending upon the specific facts and contract language.

Practical Advice Before Cosigning

Before signing as a cosigner:

• Read the entire promissory note.
• Understand whether you are jointly liable.
• Ask whether the lender must notify you of default.
• Determine whether collateral secures the loan.
• Consider whether you could personally repay the debt if necessary.

Many people sign these documents in only a few minutes but may remain legally responsible for years.

When Should You Speak With an Attorney?

Whether you are attempting to collect a debt, defending a collection lawsuit, enforcing a promissory note, or evaluating liability as a cosigner, the language of the contract and the applicable Texas statutes can significantly affect your rights.

An attorney can evaluate the loan documents, determine what remedies are available, and advise you regarding litigation or settlement options before the dispute becomes more expensive.

At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.