Q Is My Loan Co-Signer Responsible for My Debt if I Declare Bankruptcy?
Your loan co-signer may be responsible for your debts if you file for bankruptcy, but that depends on the kind of bankruptcy you are filing.
If you file for Chapter 7 bankruptcy, there’s no way to protect a co-signer unless they also file for bankruptcy. If the co-signer doesn’t file for bankruptcy too, he/she will be liable for the debts, and they'll also keep receiving phone calls from creditors and collections agencies, as well as be open to lawsuits and wage garnishments.
The only option that could help co-signers in this situation is a reaffirmation of debts. Reaffirmation agreements are contracts that allow debtors to renew the debt obligations even after filing bankruptcy.
Chapter 13 bankruptcy includes protection for co-signers of consumer debts for a period of three-to-five years, depending on the payback agreement. While the debt is being repaid, both parties (signer and co-signer) are protected from creditor harassment. But if the amount to be repaid is less than what is owed, a creditor can ask the court to lift the ban so they can go after the co-signer for the difference.
Unfortunately, the only safe way to avoid having any of the debt obligation fall on the co-signer is to stay current with payments.
If you're concerned about protecting your assets or how your bankruptcy might affect a co-signer, give us a call. Castle Law Office has been handling bankruptcies for Kansas City clients from more than 14 years. If you need the fresh start bankruptcy can provide, call us today at 816-842-6200 to speak with an attorney. Or click here to email us and schedule your free consultation.