What happens to a cosigner when you file for bankruptcy? As the debtor filing the bankruptcy petition you will generally be protected from your creditors and any collection activities, because you are covered as the primary borrower under the bankruptcy laws. The specifics of this protection will depend on the exact chapter that your bankruptcy petition is filed under. Each chapter of the bankruptcy code will offer certain protections and include certain types of debts and financial situations.
When you file for bankruptcy protection from creditors any cosigners that there are on the debts you list may be held responsible. A cosigner enters into a contract to pay off the debt if you are unable to meet the debt payments as promised, and unless the cosigner petitions for bankruptcy protection they may be held responsible for the amount owed even if your responsibility for the debt is discharged through bankruptcy.
Can Cosigners Be Protected If You File For Bankruptcy?
It may be possible to file for bankruptcy and offer some protection to any cosigners that are linked to your debts. One option is to reaffirm these debts with your creditors, and this involves signing a contract agreeing that you will continue to pay off the debt even though bankruptcy does not require you to do so. In this situation the cosigner on the debt will usually not be affected.
It may be possible to enter into payment arrangements with the creditor to keep them from going after the cosigner, even though legally you do not have to do this. Debts that are reaffirmed are typically not discharged when your bankruptcy case ends, and this means that creditors can start to take collection actions against you at this time.
Chapter 13 Bankruptcy May Also Help Protect Cosigners
Another option may be to file for a chapter 13 bankruptcy, which involves a scheduled payment plan that is monitored by the bankruptcy court. With a chapter 13 bankruptcy the court looks at all of the income, debts, and living expenses that you have and then sets a reasonable plan for repayment of your debts based on your income and living costs.
The bankruptcy judge will approve the repayment plan and the specified time period, and most debts not paid off at the end of this period will be discharged. As long as the required payments are made then any cosigners should not be bothered by collection activities. In some cases a co-debtor stay may be issued by the bankruptcy court to keep creditors from going after a cosigner.
The bankruptcy attorneys at Richard West Law can provide a free debt consolidation consultation to help you find the right answer for your unique debt problems and circumstances. Visit https://www.debtfreeohio.com or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.