It may seem very helpful when someone offers to handle paperwork on your behalf. However, before you agree to relinquish control, you should know that you are ultimately responsible for your finances—and any mistakes made on your behalf. Here are a few situations where a little outside help sometimes leads to big headaches.
-Medical billing and insurance. It is common for a medical provider to bill your insurance company for you. However, this does not mean that you are not responsible for the bill’s payment. You are responsible for the debt even if the bill doesn’t get submitted, is submitted with an error, or (for whatever reason) is not paid by the insurance company. If you do not pay the bill in a timely manner, the medical provider can report the delinquency to the credit bureaus and begin collection efforts. In some cases, it is smart to pay the bill and then try to get reimbursed from your insurance company.
-Vehicle trade-in. I just read an article from the Associated Press about an increase in the number of consumers who are left on the hook for used-car loans that dealers were supposed to payoff. When you trade in a car with a balance still owed, the dealer may offer to take care of the outstanding loan for you. If that doesn’t happen and the dealership folds, lenders can then go after you for the balance owed or repossess the car from its new owner. If you are trading in a car, pay off the loan first if at all possible. The other recommendation from the article is to deal only with dealers who are less likely to go out of business.
-Co-signing. Beware if you are on a cosigned loan that the other borrower has offered to “handle.” It is dangerous to presume that the other borrower is doing as they promised. As a cosigner, you are 100% responsible for the debt’s repayment. Any late payments will appear on your credit report; this is true even if you were unaware that late payments were being made. To be on the safe side, it is best to make payments yourself and then try to collect any money owed to you from the co-borrower.
-Divorce decree. While a divorce decree is extremely important document, is unlikely that creditors will honor its arrangements. The divorce decree is between you and your spouse and not your creditors. Your creditors are not involved in this settlement and have no input on the results. Consequently, the contracts you and your creditors have cannot be changed by the divorce decree. The ideal solution is to pay off any outstanding debts and start over. If this is not possible, visit with an attorney to discuss your rights and responsibilities before taking it for granted that you are not responsible for a debt.
Bottom line is that my 4th grader’s favorite “naughty” saying is true in some cases:
When you assume, you make an ass out of u and me.