How will filing Chapter 7 bankruptcy affect a co-signer?
Lenders often ask for a cosigner. A co-signer agrees to legally be responsible for repaying the debt if the primary borrowers defaults. A co-signer is equally responsible for the loan. This means that they are required to make payments in the event the primary borrower can’t. Parents co-signing their children’s auto loans or student loans, or friends co-signing leases are common examples. When considering bankruptcy, many people wonder what will happen to their debt if someone else co-signed it. In some cases, a cosigner does not pose a problem. If spouses co-sign the debt and file a joint bankruptcy together, both will be discharged. If only one co-debtor declares bankruptcy, the other could be held responsible for the full debt. When one co-debtor declares bankruptcy, the other co-debtor’s liability for the debt will be discharged or erased. The co-signer is still legally responsible for the debt. Your co-signer is still liable even if you are discharged. The creditor may legally pursue the cosigner to recover the entire debt. This can include a monetary judgement or repossession of collateral such as a car.
You might be wondering if you can protect a cosigner from a debtor. A co-signer may choose to pay voluntarily to protect themselves from the creditor or a debtor can do so. It is important to consult a bankruptcy lawyer if you have questions about how filing for bankruptcy will affect others. Call Now for a Free Strategy Session from a MN Bankruptcy Lawyer at LIFEBACK LAW Firm
If your debt is overwhelming, you should consult with a bankruptcy lawyer. If you have questions about bankruptcy and would like to do a free consultation to go over your options, visit
www.lifebacklaw.com
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