How Will Bankruptcy Impact a Co-Signer?
A question that is frequently asked by people who file bankruptcy is what will happen to any co-signers they may have had at the time. The impact will vary depending on the circumstances. If, for instance, two spouses file bankruptcy together and are cosigners on a number shared debts, the fact that they co-signed with each other will not have an impact on the bankruptcy. If you file bankruptcy with a cosigner, but they are not filing themselves, the impact will be different. While the language of different loan agreements may vary, it is generally true that the signer as well as the co-signer are both responsible for the full balance. When the loan is taken with the lender, the signer and co-signer agree to be fully responsible for any balance. This usually happens outside of bankruptcy. A creditor can expect either the signer, or the cosigner, to make payments on the jointly held loan. When the bankruptcy discharge is approved, it removes the personal liability for the person who filed the bankruptcy, but it does not affect any co-signers. After the discharge, a co-signer is still liable for any balance due on the loan, just as they were before filing bankruptcy.
However there are some exceptions. The most common exception is for secured loans, such as mortgages or car loans, that the person filing bankruptcy plans to continue paying. In this case, the filer may have the option to reaffirm the secured debt. This means that the debt won’t be discharged if they agree to reaffirm.
Also, a cosigner may declare bankruptcy as well! If you have filed for bankruptcy and discharged yourself from a debt, it does not mean the co-signer can’t also file bankruptcy to eliminate their own liability!
The discharge of bankruptcy is a powerful tool which can provide significant relief for anyone who has unmanageable debts. This remains true even for those with a cosigner on one or more of these debts. Our attorneys have extensive experience and will be happy to guide you through the bankruptcy process and help you find the path that is best for you.
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When the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to
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. https://www.youtube.com/watch?v=l1qNTh6nriY
