We all know that credit is tight right now, which means credit card issuers aren’t bombarding Americans with quite as many free offers for credit cards as they did in years past. Getting credit may be the first step in building credit, but that may not be a good enough reason for you to co-sign for a friend or relative’s credit card.

Before you put your John Hancock on any paperwork, make sure you know what you’re getting yourself into.

What Is a Cosigner?

Legally, a cosigner is someone who literally signs lending papers in addition to the primary borrower. By signing your name, you, the cosigner:

• Are legally responsible for any payments the primary borrower cannot make
• Will see any negative action from the account in question on your credit report
• May have to pay off any unpaid debt if the primary borrower files for bankruptcy

Those are serious responsibilities. So here are some questions to ask yourself (and the person trying to get a credit card) before you agree to anything:

Can I afford to cover the account balance if the borrower defaults?

Read the fine print of the credit card offer. Know what interest rates, penalties and fees would be charged if the borrower stopped making payments. Could you afford to make all payments (say, if the card was maxed out)?

If the answer is no, you should not agree to cosign for this card.

If the answer is yes, but you don’t want to spend your money on someone else’s debt, you should not agree to cosign.

Why does the person want a credit card?

These days, a debit card functions much the same way as a credit card—travel and electronic bill payment, for example, can be managed quite easily with a debit card.

If the borrower wants to begin building a credit history, that’s a legitimate goal—but it doesn’t mean you should automatically agree. Consider the limit of the card, its interest rates, fees and penalties, and the borrower’s level of maturity.

Why does the person need a cosigner?

This may be the trickiest question of all. Here are a few answers you might hear:

• I’m too young to get one on my own. The Credit CARD Act introduced this year did change the age requirements for getting a credit card, but not in the way some people think. In fact, 18- to 20-year-olds can still get credit cards on their own, as long as they can show proof of income. If a young adult does not have sufficient income to get a card on his own, he or she may not be a good credit risk for you.
• We’re in a credit crunch—no one can get credit these days. That’s not technically true. People get credit all the time. If this person’s having trouble getting credit, it may mean that credit card issuers see him or her as a bad credit risk̬and you may want to take a signal from them.
• My credit report has mistakes in it. This is no reason to get a cosigner. If you hear this excuse, tell the person to go to www.annualcreditreport.com and contact the bureaus reporting the mistakes. The process is free and errors will not disappear any other way.

Generally speaking, make sure you understand the seriousness of cosigning for a credit card: you could be taking on a lot of debt, so don’t agree to cosign unless you think your finances can handle it.

Additional Resources

Fast Facts on Cosigning Loans (PDF)

Credit CARD Act of 2009 (PDF)

More than 15 million Americans may have to repay tax credits issued by the Obama Administration when they file their taxes next year, according to a report by the Chicago Tribune.

More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes, according to J. Russell George, the Treasury inspector general for tax administration.

The Making Work Pay tax credit, part of the greater stimulus plan, helped ease the effects of the recession for taxpayers by providing a tax break in each paycheck. Individuals were given a $400 credit, and married couples $800.

However, the Treasury Department failed to consider that many married couples are dual-earners, and gave each spouse the $800 credit. Likewise, those working multiple jobs may have been given a double tax credit.

A similar initiative gave tax breaks to those drawing Social Security benefits. The Social Security Administration sent out a $250 “bonus” payment to more than 50 million Americans. However, seniors drawing an income aside from Social Security also received the tax credit—and will have to repay the SSA credit come tax time.

The irony, of course, is that in devising the new tax withholding tables, the Internal Revenue Service failed to realize that millions of Americans are finding new ways to make ends meet in the down economy—including working multiple jobs, having both spouses work, or working well into their retirement years.

Repaying the $250-to-$800 tax credit may not be welcome news to most Americans, but it shouldn’t have too much of an effect on refunds. The average tax refund for 2008 was around $3,000.

For those who end up owing more on their taxes, take head—taxes are one of the few types of debt that cannot be discharged in personal bankruptcy.

A lot happens in a week in the world of personal finance. Here’s a look at two major financial happenings you need to know about.

Jobless Summit at the White House

The latest jobless numbers show that the U.S. unemployment rate has inched further upward to 10.2 percent, with experts predicting a rate as high as 10.5 percent in coming months.

To address growing apprehension, the Obama administration has reportedly announced that it will hold a forum next month to address the issue of joblessness in America.

• Public & private sector experts: The forum will apparently involve thinkers from both the business world and the government getting together to attempt to develop new strategies for promoting hiring and job growth.
• Prosperity and American innovation: The president has reportedly said that the efforts will aim to help worldwide economies, which collapsed with the fall of the U.S. real estate industry and now rely on U.S. innovation for full recovery.

While the summit may not lead to any major ah-ha! moment among policymakers, it may help calm mounting worries about the 26-year high of the unemployment rate.

Free Checking in Check?

A recent report from msnbc.com suggests that no-fee checking may soon be a thing of the past for some consumers. Here’s why:

• Limits on credit card fees: The Credit CARD Act of 2009, set to take full effect next year, will limit the fees credit card issuers can charge and tighten their requirements for hawking high-interest products. This means lost revenue for banks.
• Limits on overdraft fees: Currently before Congress is legislation that would cap the amount of money banks can charge for abusive overdraft loans and overdraft fees, which have become a major source of income in recent years. Again, this could lead to diminished funds for banks.

It’s really no surprise, then, that major banks like CitiBank and Bank of America have apparently announced changes to their free checking account policies.

Citi will reportedly continue to waive its monthly fee for those who maintain a $1,500 balance, and Bank of America, it seems, will continue offering free services to those who have direct deposits established or meet other criteria.

The lesson here is to be a curious and active consumer. Read all mail and email you receive from your bank so that you’re immediately aware of any changes that could cost you money or lead you into debt.

Additional Resources

Credit CARD Act of 2009 (PDF)

Michigan-based Lear Corp, one of the leading manufacturers of automotive seats, electrical distribution systems and electronic products, has completed a financial reorganization after having filed for Chapter 11 bankruptcy relief in July, 2009.

In a statement, Lear’s Chairman, Chief Executive Officer and President Bob Rossiter said that we have moved through the financial restructuring process without missing a beat operationally. The bankruptcy lasted four months.

The reemergence from Chapter 11 came after reaching an agreement with lenders to convert $3.6 billion of debt to equity, according to Bloomberg.

Lear Corp fell into bankruptcy as the automotive industry as a whole struggled, including the bankruptcies of General Motors Corp. and Chrysler LLC. General Motors represented 23 percent of Lear’s sales, which totaled $13.6 billion overall.

According to the company, Lear Corp maintained business with its customers even in the course of the bankruptcy.

Restructuring Debts

When Lear Corp filed for Chapter 11, it already had in hand a debt restructuring agreement with most of its lenders, in what is called a prepackaged bankruptcy. This model of bankruptcy filing can expedite the process by gaining approval of restructuring plans with lenders ahead of time, allowing a company to maintain continuity of service and business practices.

Agreements determined who would serve on the board and established $550 million in loans.

Judge Allan Gropper, who presided over the case, also indicated that the plan had the support of creditors, and he reiterated the importance of expediency in allowing the company to move forward following the bankruptcy, despite the complaints of individual shareholders.

The Bloomberg article details the plan as such:

Under the plan, secured lenders will swap debt for equity in the reorganized company, getting about 26 percent of the new common stock, $500 million in preferred stock and a new $600 million term loan. The preferred shares can be converted into an additional 26 percent of common stock.

Secured creditors, under this plan, will recover an average of about 83 percent, while unsecured creditors will recover an average of about 42 percent.

Loans After Bankruptcy

Bloomberg is reporting that JP Morgan Chase will provide Lear Corp with $950 million in loans. The company has also claimed a backlog of sales through 2012 that will represent an increase of 25 percent from its previous level.

Rossiter, in his statement, continued with a resoundingly optimistic message about Lear Corp’s future. “We have continued to win new business globally, strengthened our industry-leading global capabilities and the spirit of the Lear team has never been more positive,” he said.

He went on to assert Lear Corp’s advancement with a disciplined financial profile and a continued commitment to investment in new products and technologies, and growth in emerging markets.

Hollywood icon Warren Beatty can continue with a lawsuit over the right to comic book character Dick Tracy, the judge overseeing The Tribune Company’s bankruptcy case determined Monday.

Beatty bought the rights to develop Dick Tracy TV and film projects from the Tribune in 1985, leading to a successful venture as producer, director and star of the 1990 film version.

However, Tribune, which syndicates the strip (it amazingly still runs today), claimed that due to inactivity in continuing to develop the character, Beatty’s rights lapsed. In the 2008 lawsuit, Beatty claims that he had been working on a new television project for the character at the time, according to Reuters.

When the Tribune filed for bankruptcy in December of last year, the lawsuit was halted by an automatic stay.

Judge Kevin Corey’s decision lifts the stay, allowing Beatty to continue the lawsuit. Judge Corey also allowed the lawsuit to take place in California, where Beatty filed suit, and not in Delaware, where the Tribune’s bankruptcy case was filed.

Automaker Chrysler is disbanding a group of engineers focused on creating electric cars, according the USA Today. Chrysler had announced last year that its three new electric models would be available in 2010.

Chrysler had touted its electric lines as part of its argument to receive federal bailout funding. Chrysler received a $4 billion emergency loan from the government in early 2009, including $70 million in grants from the U.S. Department of Energy to develop hybrid vehicles.

Chrysler filed bankruptcy in April, but the procedure was postponed by a Supreme Court case regarding Italian automaker Fiat’s attempt to acquire Chrysler.

The divisions researching electric cars was announced by Fiat CEO Sergio Marchionne as part of Chrysler’s five-year strategy.

Contrary to Chrylser’s original goals, Marchionne announced electrics will only make up 1% or 2% of Fiat sales by 2014, according to the USA Today article.

Reports from various government agencies released late this week indicate important improvement in various sectors of the economy, including retail sales and, surprising, employment.

Jobless Numbers

The Department of Labor reported on November 5th that initial jobless claims for the previous week fell to 512,000, a drop of 20,000 from the previous week. And, perhaps most promising, that number represents the lowest number of new filings since January.

Despite this relatively good news, though, October’s unemployment numbers show that total unemployment levels are at 10.2%, the highest in 26 years. And that number only includes those unemployed actively looking for work—and excludes those who have taken on part-time jobs to make ends meet.

Retail Picking Up… For Some Companies

On the other side of the recession coin, sales improved for a variety of retailers: Costco Wholesale Corp., Gap, Inc. and TJX Cos. (of T.J. Maxx and Marshall’s) all posted better-than-expected gains, according to sources.

Other prominent retail outlets, though (including Limited Brands, Wet Seal and Children’s Place), reported lower sales numbers than a month ago.

A New American Consumer?

A recent msnbc.com article suggests that recession-shy Americans have altered the way they shop—and that may have some truth in it. Look for:

• Value-focused shopping: Uncertainty in employment has led to less spending across the board – even among the relatively wealthy.
• Safe retail offers: Rather than gamble on new or must-have products, many retailers are reportedly sticking to safer gift items this season.
• Less interested shoppers: The result could be a cycle of decreasing interest among buyers – with little to clamor for, American shoppers may prefer to save their shopping sprees for a better time.

Whether or not this assessment of American consumption proves true for this holiday season, the recent numbers offer a glimmer of hope – but only that. After all, even the positive changes in the last few weeks have been modest. After the economic conditions of the past several months, it doesn’t take much to look good.