You feel like you are drowning in debt. The collection calls will not stop. You think that bankruptcy might be the best option for you, but you have one really big concern – what will happen to the co-signer on your loan? Questions like these are common, and having basic knowledge of bankruptcy before filing bankruptcy can help you make the best possible decision. Our attorneys can help you understand all of the intricacies of bankruptcy before you file.
What Happens to Your Co-signer if You Declare Bankruptcy?
If you have a joint bank account with your life partner or business partner, then declaring bankruptcy can influence his or her, as well, depending on the type of bankruptcy you declare. When filing bankruptcy, only you will be free from the debts in question. Your partner, or anyone that has co-signed your accounts, will still be accountable for your shared debts.
Can I Protect My Co-signer From My Bankruptcy?
You started a business and you opened a joined bank account. Unfortunately, your business was not successful, and you are now drowning in debt. The only solution that you can see right now is bankruptcy. There are two types of bankruptcy that you can declare in this situation:
- Chapter 7 Bankruptcy: If you declare this type of bankruptcy, then your co-signers will be directly affected. You will be released from the debt, and the creditors will collect the debt directly from your co-signers. You can save your cosigners even after declaring Chapter 7 bankruptcy, however. One of the ways to do this is by reaffirming your debt. After declaring bankruptcy you can make a new agreement with the lender. By doing this the burden on your co-signers will remain constant because you will remain on the account.
- Chapter 13 Bankruptcy: This type of bankruptcy is different than chapter 7 bankruptcy. In chapter 13 bankruptcy your co-signers are protected by the stay of the co-debtor unless they would be liable for the debt through the ordinary act of their business or your chapter 13 bankruptcy was closed, dismissed, or converted to a chapter 7 bankruptcy instead. Keep in mind though that there are certain situations in which the stay is limited. If your cosigner received a benefit from the loan, you do not pay the debt through your repayment plan, or your creditor’s interests would be harmed if the stay continues, the stay may not protect your co-signer.
Contact an Experienced Bankruptcy Attorney Today
While it is normal to be concerned about how a bankruptcy filing could impact your co-signer, bankruptcy may still be your best option. There are options available that may protect your co-signer from your bankruptcy, and we can help you understand what those options are.
Bankruptcy is never easy, but the attorneys at Bankruptcy Law Center will help guide you through the process and make it as quick and easy as possible. Contact us today to schedule a consultation and let us help you get back on your feet financially.