Ike's debt to the bank

[runhard]

I just finished watching The Celebration and for the love of me I'll never understand how John could be in debt for Ike if he's just the co-signer. Okay let's say John actually took out the loan himself wouldn't Ike still have to make the payments? On top of all of that how can the bank call in Ike's loan even if they heard all the refrigerators were lemons unless Ike missed a payment? Either way Ike would be making the payments not John what does everyone else think?

[patriciaanne]

Jun 29, 2023 2:17:06 GMT -5 runhard said:

I just finished watching The Celebration and for the love of me I'll never understand how John could be in debt for Ike if he's just the co-signer. Okay let's say John actually took out the loan himself wouldn't Ike still have to make the payments? On top of all of that how can the bank call in Ike's loan even if they heard all the refrigerators were lemons unless Ike missed a payment? Either way Ike would be making the payments not John what does everyone else think?

The co-signer is every much "on-the-hook" for the debt as the person taking the loan. So if Ike misses a payment, goes out of business, or drops dead, the bank will be at John's front door with their hand out.

[Easton]

First and foremost, the condition of the refrigerators is completely irrelevant. The bank simply supplied the money to buy them whether or not Ike could sell them - which he couldn't. That was why Ike was so upset. He'd used his store as collateral. If he couldn't make the payments, the bank would own his store (and his home).

It's like the idiots who mortgage their homes or take out huge loans to buy lottery tickets. The bank doesn't care if all you win is a free ticket. The idiots still owe the money.

As for John cosigning Ike's loan, he is simply guaranteeing payment of the loan if and only if Ike fails to pay off the loan for any reason (such as illness, death, or, say, the store burning down). Still, Ike has options before John becomes responsible. He can renegotiate the loan, defer the payments, and other options available to him.

Ike still owed $750 to the bank and John Martin, knowing that Ike's store was being used as collateral for the bank and that Ike had nothing else of sufficient value to become collateral, suggested that his mother would loan Ike the money to pay off the bank loan if John Walton became the collateral. John Walton's reputation and promise that the loan would be paid off was good enough.

John knew that Ike had taken a chance with the refrigerators and he had done everything he could to make them work and sell them so he could pay the loan. He and Ike had been friends long enough to know that Ike would do everything he could to prevent John from paying off his loan.

In effect, John was in debt to the bank on paper only.

[jaydub87]

Co-signing for someone is a written guarantee that if they don’t pay the debt, you will. It’s still practiced often today. When my wife and I got married, the bank wouldn’t lend us money for our first house because we hadn’t established credit. My dad co-signed the loan. If I hadn’t made the monthly payments, he would’ve been responsible for them.

[runhard]

Jun 29, 2023 8:28:12 GMT -5 Easton said:

First and foremost, the condition of the refrigerators is completely irrelevant. The bank simply supplied the money to buy them whether or not Ike could sell them - which he couldn't. That was why Ike was so upset. He'd used his store as collateral. If he couldn't make the payments, the bank would own his store (and his home).

It's like the idiots who mortgage their homes or take out huge loans to buy lottery tickets. The bank doesn't care if all you win is a free ticket. The idiots still owe the money.

As for John cosigning Ike's loan, he is simply guaranteeing payment of the loan if and only if Ike fails to pay off the loan for any reason (such as illness, death, or, say, the store burning down). Still, Ike has options before John becomes responsible. He can renegotiate the loan, defer the payments, and other options available to him.

Ike still owed $750 to the bank and John Martin, knowing that Ike's store was being used as collateral for the bank and that Ike had nothing else of sufficient value to become collateral, suggested that his mother would loan Ike the money to pay off the bank loan if John Walton became the collateral. John Walton's reputation and promise that the loan would be paid off was good enough.

John knew that Ike had taken a chance with the refrigerators and he had done everything he could to make them work and sell them so he could pay the loan. He and Ike had been friends long enough to know that Ike would do everything he could to prevent John from paying off his loan.

In effect, John was in debt to the bank on paper only.

Exactly what I was saying but when asked John Martin says no that John's in debt which he is only if Ike defaults. That's where the confusion is John is not in debt like any cosigner and it's Ike who still pays the monthly premiums not John.

[Easton]

John is indebted to pay off the loan if Ike cannot, but he is not 'in debt' until such time occurs that Ike cannot pay. John does not owe the money to the bank. Ike does. Ike is 'in debt'. John becomes 'in debt' when he becomes responsible to pay it.

It's a matter of semantics.

You really need to experience it to understand it. I'm 71 years old. I have experienced it.

[carol]

Jun 29, 2023 8:28:12 GMT -5 Easton said:

First and foremost, the condition of the refrigerators is completely irrelevant. The bank simply supplied the money to buy them whether or not Ike could sell them - which he couldn't. That was why Ike was so upset. He'd used his store as collateral. If he couldn't make the payments, the bank would own his store (and his home).

It's like the idiots who mortgage their homes or take out huge loans to buy lottery tickets. The bank doesn't care if all you win is a free ticket. The idiots still owe the money.

As for John cosigning Ike's loan, he is simply guaranteeing payment of the loan if and only if Ike fails to pay off the loan for any reason (such as illness, death, or, say, the store burning down). Still, Ike has options before John becomes responsible. He can renegotiate the loan, defer the payments, and other options available to him.

Ike still owed $750 to the bank and John Martin, knowing that Ike's store was being used as collateral for the bank and that Ike had nothing else of sufficient value to become collateral, suggested that his mother would loan Ike the money to pay off the bank loan if John Walton became the collateral. John Walton's reputation and promise that the loan would be paid off was good enough.

John knew that Ike had taken a chance with the refrigerators and he had done everything he could to make them work and sell them so he could pay the loan. He and Ike had been friends long enough to know that Ike would do everything he could to prevent John from paying off his loan.

In effect, John was in debt to the bank on paper only.

Also if Ike and Cora Beth were to die before the loan was paid off any money in the estate, the sale of the store, sale of the car...etc.. would go toward paying that loan. If there was a remainder left on the loan after that then the bank would come to John.