Co-Signers & Bankruptcy

bankruptcy co-signerMany people who file for bankruptcy often have questions about what might happen to any co-signers on accounts that they plan to list on their bankruptcy petition.  When a debtor files for chapter 7 bankruptcy, any co-signer on an account that is discharged in the bankruptcy will be responsible for the remainder of the debt on the account. This is because debt collectors and credit card companies can no longer collect against a debtor who has filed for bankruptcy and received a a discharge of their debts in their case.  If you have a co-signer on a debt that you think will be discharged in your bankruptcy, you should be that person on notice so that they can make arrangements to pay on that debt so that their credit will not be affected should the account go delinquent.

On the other hand, if a chapter 13 bankruptcy is filed, a co-signer will be protected by the bankruptcy automatic stay as long as the chapter 13 repayment plan is active. If a debtor fails to make their required chapter 13 monthly payments, then the co-signor will once again be liable for any joint debt along with the bankruptcy filer should the case be dismissed.  If the chapter 13 bankruptcy filer receives a discharge of their debt at the end of their chapter 13 bankruptcy plan and there is debt remaining on the co-signed debt, then the co-signer would be liable for paying the remaining balance and their credit could be affected if the remaining balance is not paid off.  Again it is best to advise any co-signer of potential debts out their that the co-signer may be liable for so that they can make proper arrangements.

If you have additional questions about how having a co-signer may affect your bankruptcy case give Symmes Law Group a call at 206-682-7975 to speak to a bankruptcy attorney who can best advise you.

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