Considering Your Loan Co-Signer When You File Bankruptcy

by | Aug 25, 2020 | Lawyers

Being overwhelmed with debt may result in you deciding to file bankruptcy in Valdosta. Filing for Chapter 7 essentially wipes out most or even all of your debt except for certain obligations like back child support payments. One obligation you must carefully consider is any loan debt that was co-signed by another individual. That co-signer becomes responsible for payments if you file for Chapter 7 bankruptcy.

An Uncomfortable Situation

If you are seriously considering the option to file bankruptcy in Valdosta, you probably are far behind on payments to various organizations. Your co-signer may have already been contacted by the company and may have received a demand for payment. This obviously is an extremely uncomfortable situation. What happens now?

An Example

Consider an example in which a vehicle financing company repossesses a car for which the buyer still owes $10,000. The company is only able to obtain $6,000 for the car at auction. If the borrower has declared bankruptcy, the debt is discharged from his or her financial obligations. A co-signer, however, now becomes liable for that remaining $4,000. The debt is not erased.

A Possible Solution

Depending on your circumstances, you may have the option of paying the money on a co-signed loan after bankruptcy simply by continuing to make scheduled monthly payments. This could be the case in a personal loan, for example. Technically, you are no longer liable for the loan because of the bankruptcy, but your diligence will prevent the creditor from taking action against your co-signer.

For more information visit Charles Farrell Jr. LLC today!

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