Many times, if a person cannot secure a loan on their own, they turn to a trusted family member or friend to co-sign the loan with them. When co-signers sign a loan together, under the law they both become responsible for the debt. However, if one person decides to file for a Chapter 7 bankruptcy due to a difficult financial situation, this choice can have an impact on a co-signer.
Chapter 7 Bankruptcy and Debt
When a person decides to file for a chapter 7 Bankruptcy, one of the first benefits to happen is the automatic stay. Typically, those filing for bankruptcy are dealing with creditors constantly seeking debt payments. The automatic stay can bring relief as it immediately stops creditors from coming after your debts while you are going through the bankruptcy process. Additionally, in a Chapter 7 bankruptcy, your obligation to pay any dischargeable debts with be eliminated.
What happens to my co-signer?
If you decide to file for a Chapter 7 bankruptcy, you may quickly see the benefits. However, the same may not be true for your co-signer. First, the automatic stay does not apply to your co-signer. This means that creditors can still go after your co-signer for payments on your loan or to collect any debt. Second, while bankruptcy will discharge your debt, the same is not true for your co-signer. The co-signer will still be responsible for the debt.
For example, if you have a family member co-sign on a car loan with you, but then choose to file for Chapter 7 bankruptcy, the co-signer will be impacted. If you choose to surrender the car, then your debt will be discharged by the bankruptcy. However, the creditor can still go after your co-signer to collect any owed debt. If your co-signer stays current with the payments, they can still keep the property.
If you plan to keep property that you have co-signed, you can “reaffirm the debt.” This means, that you would sign a new agreement with the lender so you can keep paying the loan and keep your property (such as a car) even after the bankruptcy. This can be helpful to your co-signer as the co-signer will not bear the burden of the debt themselves, but both of you will remain responsible for the loan.
Get Help Navigating Your Lawrenceville Bankruptcy
If your financial situation has led you to consider filing a Chapter 7 bankruptcy, it is important to have the assistance of a skilled Lawrenceville Bankruptcy attorney. Filing for bankruptcy is no simple task, especially if you have co-signed loans for some of your assets.
It is crucial that you tell your attorney if any of your debts are co-signed. This fact is very important and must be disclosed in your bankruptcy. The skilled bankruptcy attorneys at The Ballard Law Group can help guide you through this process so that you make the best choices for yourself and your co-signer. To begin the Chapter 7 bankruptcy process, or just to learn more about how bankruptcy might help better your financial situation, contact the Ballard Law Firm today for a consultation by calling 404-220-9906.