What Happens to Co-Signers and Joint Accounts after Filing for Bankruptcy?
When a debtor decides to file bankruptcy they may have co-signed for debts or be named on joint bank accounts with relatives or kids. At your initial consultation your bankruptcy attorney will inform you of how these situation may affect you or others with whom you share joint debts or accounts.
When an individual files for bankruptcy they must list all of their debts and all of their assets on their bankruptcy petition with the help of their attorney. This includes all bank accounts in which a debtor is named as a joint account holder, even if they claim the funds in the account do no belong to them. If you are on title or have access to funds in an account it will be considered an asset of your bankruptcy estate. With that said, if the debtor can prove that they are on the accounts in name only and have made no withdrawals or deposits into the account to commingle their funds with somebody else’s, then they are probably in the clear and a bankruptcy trustee would not seek to obtain the funds in that account for the benefit of their creditors. Being able to show a clear paper trail is very important in these situations. With that said, it never hurts to use left over bankruptcy exemptions on such accounts if you have them available to make certain no funds will be seized.
Another popular question of debtors is what will happen to a debtors co-signers post bankruptcy filing. If a debtor is a co-signer on a joint account and that debt is discharged in the chapter 7 or chapter 13 bankruptcy, then the other co-signer would be solely liable for such debt and no recourse could be taken against the person who filed for bankruptcy. If the debt is a non dischargeable debt such as a student loan, both parties would remain liable for the debt post bankruptcy filing. Therefore if you have co-signed on a debt with somebody else you might want to put such individuals on notice of your bankruptcy filing so that any affected parties can make arrangements accordingly.
If you have additional questions please call Symmes Law Group at 206-682-7975