subject: CC Brown Law – Bankruptcy and Co-signers [print this page] CC Brown Law Bankruptcy and Co-signers CC Brown Law Bankruptcy and Co-signers
Deciding to file for Bankruptcy is often one of the most nerve-racking decisions of your life. Not only you are going to worry about your own situation and your financial future, but if you have cosigners you are concerned about how your bankruptcy will affect them and how it will affect your relationship with them. It is natural to try to find a way to safeguard family and friends who had enough faith in you to cosign a loan.
Cosigner:
In some instances, the borrower of a loan may not have had a high enough credit score to get the loan on his own. Then they are asked someone with a stronger credit history to sign the loan with them. When someone becomes a cosigner, he agrees to be just as responsible for that debt as the primary borrower. Obviously you or the person who cosigned for you may not have understood that at the time but that is the law.
Bankruptcy and Co-signers:
Before filing for bankruptcy, You must make sure which type of Bankruptcy will be appropriate for your situation. At this time it is important to ask if your co-signer would be asked to pay your debt if you file for bankruptcy. The answer to this question would depend on the type of bankruptcy that you file for and the particulars of your bankruptcy plan.
Basically, only a Chapter 13 bankruptcy will protect your co-signer. But with Chapter 7 bankruptcy, the debtor only will be guarded and the co-signer will still be liable for the debt. That is to say, with Chapter 7 bankruptcy, creditors will still have the right to demand that your co-signer pay off the outstanding payments. On the other hand, Chapter 13 bankruptcy is able to give the co-signer increased protection under the right conditions. Under chapter 13 bankruptcy, as long as the bankruptcy proceeding is active the co-signers will receive a stay. All the same, when the plan closes, the co-signer is once again liable to pay any outstanding payments. The following aspects should stay constant while you file for bankruptcy and in the later processes also. If any one of the following factors is not met at the point of bankruptcy filing or later, then your co-signer will be responsible to pay off your debts. The factors are,
You file for Chapter 13 bankruptcy. Chapter 7 will not protect your co-signers
The debt of the co-signer has to be a consumer debt, which is to say, a personal debt and not a business one.
The co-signer is not the recipient of any benefits from the debt proceeds.
The exact bankruptcy plan payments are made in accordance with your bankruptcy.
When filing for Bankruptcy, one should keep in mind that the conditions mentioned above are legal ones and have to be dealt in the appropriate manner. It would be wise to contact a bankruptcy attorney to ensure the protection of your co-signer.
