Quite often we have clients who require a cosigner in order to be approved for a loan. A cosigner is someone who can take responsibility for the debt if you become unable to pay it. So what happens if you file for bankruptcy and your cosigner does not?

 

If you file for bankruptcy, you will be protected from creditors by the Automatic Stay of Bankruptcy. The Automatic Stay of Bankruptcy prevents creditors from attempting to collect money from someone who has filed bankruptcy. This Automatic Stay is like a shield that protects anyone who files bankruptcy; however, a co-signor who does not file bankruptcy has no such protection.

 

Fundamentally a co-signor is in no worse position if you file for bankruptcy. So for example, if you are current on a car loan and file for bankruptcy your creditors cannot pursue the cosigner. Just as if you are current on a car loan and you do not file for bankruptcy. Additionally, if you fall behind on your car payments, the vehicle is repossessed and you do not file for bankruptcy then the bank can pursue the cosigner for any losses they sustain. Likewise, if you fall behind on your car payments, the vehicle is repossessed and you do file for bankruptcy the bank will still be able to pursue your cosigner, the only difference is that the bank will not be able to pursue you.

 

Therefore, it is important to speak with an experienced bankruptcy attorney to help you fully understand the options available to you, especially if the co-signor was a family member or friend. Talk to an experienced attorney at the Guinn Law Group and learn how bankruptcy can help you.