Say, for instance, that your current financial situation is forcing you toward a bankruptcy filing. In this case, you may be worried about how your next steps will impact any co-signers you may have. Follow along to find out what happens to co-signed debts in the event of bankruptcy and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. can guide you through this.
What is a co-signer?
Put simply, a co-signer may be a family member, friend, or otherwise loved one who may help you become qualified to take out a loan.
That is, when you are first starting with your financial independence, you may have little to no credit. Or, you may be at a point in your life where you need to get out of some sort of financial struggle. In both of these examples, a lender may want another person to also promise to pay back a loan. So, both you and the co-signer will be equally held responsible for paying it off.
What will happen to my co-signed debts in the event of bankruptcy?
Having a co-signer may not impact your ability to file for bankruptcy. But on the flip side, your filing for bankruptcy may affect your co-signer.
Firstly, when it comes to Chapter 7 bankruptcy, a cosigner’s income and their overall ability to pay off the loan will not factor into your eligibility for declaring bankruptcy. These co-signed debts will be considered dischargeable debt in your bankruptcy proceedings. Meaning, the New York bankruptcy court will no longer make you liable for paying off these debts. However, your co-signer may still be legally obligated to pay them. This is because the bankruptcy court does not offer your co-signer any protections from lenders coming after them.
Secondly, when it comes to Chapter 13 bankruptcy, a cosigner’s financial status similarly does not affect your ability to declare bankruptcy. But dissimilar from Chapter 7 bankruptcy, this bankruptcy type may offer your co-signer some sort of protection. This is due to Chapter 13 bankruptcy requiring you to make payments toward your co-signed debts through your repayment plan. However, if you default on your repayment plan, a cosigner may be held responsible for the remaining balance.
Understandably so, you may not have anticipated that your financial situation would take a turn for the worst when you took out a loan with the help of a co-signer. And you may be experiencing feelings of guilt, even though your initial intentions were likely pure. In the end, a talented Rockland County bankruptcy attorney is ready and willing to stand by your side throughout your bankruptcy proceedings. Contact The Law Offices of Allen A. Kolber, Esq., P.C. today.
