How Does Bankruptcy Affect Co-Signers?

One result of the recent recession and credit crisis is that banks and credit card companies have changed how they lend money. Qualifying for a loan or credit card is more difficult now than in the past. More people are now required to find someone to co-sign for them in order to obtain credit. But what happens to the co-signed loan and your co-signer if you, the primary borrower, face financial problems and have to file for bankruptcy?

Reorganizing Co-Signed Debt Using Chapter 13 Bankruptcy

You can give protection to your co-signer by using a Chapter 13 debt repayment plan. To protect your co-signer, you must have the ability and willingness to pay off the co-signed debt in full during your repayment plan period. A good lawyer, such as Paul Camarena of North & Sedgwick Law in Chicago, can design a Chapter 13 plan that protects the co-signer while forcing the lender to accept repayment terms that work for you.

The repayment plan includes your co-signed loan and all other eligible debts. Everything gets rolled into a single plan, and you make payments for three to five years. If you make your Chapter 13 payments on time, the creditor will not be allowed to contact your co-signer to ask for payment.

Chapter 7 Bankruptcy and Co-Signed Loans

While Chapter 7 is useful for eliminating a wide variety of consumer debts, it unfortunately cannot be used to protect a co-signer. Only the bankruptcy filer is eligible for debt discharge, which means that although the creditor may not be able to collect from the filer, it is allowed to pursue the co-signer, who remains liable on the loan.

Questions About Co-Signed Loans? Call an Experienced Bankruptcy Attorney in Downtown Chicago

Everyone's financial situation is unique. Your co-signed debt is part of the bigger picture of your overall debt. Chicago bankruptcy attorney Paul Camarena focuses on bankruptcy and is passionate about helping people get through difficult times. He can help you understand the best ways to deal with your debt and how bankruptcy affects co-signers.

For a free consultation, call 312-878-8429 or email the firm. Se habla Español.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.