Rita cosigned a promissory note for $500 at the Federal Credit Union for her friend Sue. Sue defaults on the note, and the credit union collects $500 from Rita on her suretyship obligation. Rita then not only gets the right to collect $500 from her but also gets the Federal Credit Union's rights against Sue.

Question

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When a cosigner pays on a defaulted promissory note, they acquire the right to collect from the borrower (Sue) and also acquire the creditor's (Federal Credit Union's) rights against the borrower (Sue). This is known as subrogation.

Rita Cosigned a Promissory Note for $500 at the Federal