Co-Signors in Bankruptcy
It is very common that two people will co-sign on each other’s debt. Whether this is a spouse, parent, child, or significant other. If one liable party on the loan decides to file bankruptcy, you may be wondering what will happen to the other party/the co-signor?
Typically, as long as the co-signed debt stays current, there should not be an impact from the bankruptcy on the party who did not file.
For example, say you and your non-filing spouse own a home with a mortgage together. If you file, as long as the mortgage stays current, your non-filing spouse should not be impacted by your filing.
The non-filing co-signor would be impacted if the loan did not stay current though. If only one person files bankruptcy, the other liable party on the loan will still be liable for the debt and can be collected against. An exception, would be if the co-debtor stay applies in a chapter 13 filing.
Say for example, you and your non-filing spouse own a vehicle together with a loan you are both liable on. If you file bankruptcy and surrender the vehicle, your non-filing spouse will still be liable on the loan. Your non-filing spouse can be collected on, as they will not have the same protections you do from the bankruptcy filing.
An impact that may take place from you filing without your co-signor/co-debtor is typically online access will shut down and statements will stop being sent on the account. This is because when a bankruptcy is filed, lenders do not want to accidentally violate bankruptcy law.
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For any questions you have regarding your co-liable debt or anything else bankruptcy related, visit www.lifebacklaw.com to speak with an attorney today. You will be glad you did!
