How Is a Cosigner Affected if I File Bankruptcy?
If someone guaranteed or cosigned any of your debts, deciding to file bankruptcy could also have an effect on them. Your bankruptcy discharge is only going to stop the process of you being obligated to pay for your debts. It will not affect the responsibility of those guarantors or cosigners on your debt.
If you are filing a Chapter 7 bankruptcy, all actions regarding collection taken against you have to stop. This is due to the automatic stay on the bankruptcy. However, an automatic stay in Chapter 7 bankruptcy does not protect your cosigner or guarantor, so your creditors can still collect the debt from them if you are paying the debt in full.
If you file for a Chapter 13 bankruptcy, your guarantors and cosigners on consumer debts may be protected by automatic stay. This is known as the Chapter 13 co-debtor stay. But if you are only paying a portion of the bill – the creditor may pursue the balance from the guarantor or cosigner.
You can reaffirm your debt during Chapter 7 and give up the benefits that come with your discharge. This will make you personally responsible for the obligation once more, protecting your cosigner if you continue to make payments and pay off the debt in full. You may also make voluntary payments on behalf of your cosigner during Chapter 7 bankruptcy to ensure that they do not feel the burn of your debt on their backs.
While a Bankruptcy filing may protect you it may not protect people who cosigned for you. Be sure to explore these questions with your Bankruptcy lawyer before you file.
At the law office of Attorney Robert A. Boyd in Willoughby, Ohio, we help clients weigh all of their options when it comes to bankruptcy. We can explain how bankruptcy will affect all of your finances, including your consignors, and provide you with advice regarding how to proceed. Call us at 440-230-3230 to schedule a consultation.