How bankruptcy affects a cosigner

bankruptcy and cosigners

How will my bankruptcy affect my cosigner?

Ever wondered how you filing for bankruptcy might affect someone who has cosigned a debt with you?  Many people use a co-signer to purchase all types of things.  for the most part this is done because they have little or nor credit history or the credit history that they have is in very bad shape.  Most of the time we see close family members or friends as the cosigners.  So when you financial problems start to boil up it’s only natural to wonder how a cosigner is affected by a bankruptcy.

Certainly filing a bankruptcy could affect cosigners, however there are ways to protect them. How much protection they receive depends on if it is a Chapter 7 or Chapter 13 case. In a Chapter 7 you get an automatic stay after you file so creditors can’t collect from you, but this automatic stay doesn’t apply to your co-signer which means creditors are free to collect from them.  In a Chapter 7 case you can protect co-signers in most instances by re-affirming the debt or simply paying off the debt.  However the timing of when to tack such action is something that an experienced bankruptcy attorney can advise you on.  Of course if you are in Utah come in and visit with us I’m sure we will be able to help.   Most of the time a Chapter 13 is much safer for your co-signer, they are protected under the automatic stay in most instances from the moment you file the case. However creditors can ask to lift the automatic stay under a few circumstances so knowing your options is curtail if you are planning to file a Chapter 13 case.   If you are going to do a Chapter 13 or a Chapter 7 case your attorney will need to be advised of the name and address of your co-signer so they can be listed in the bankruptcy paperwork.  Always remember the more information provided your attorney the better.

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