When an individual files for bankruptcy, the financial relief it provides may not extend to everyone involved in their debt. One group particularly vulnerable in this situation is co-signers. Whether it’s a family member, friend, or business associate, co-signers may face unexpected consequences when the primary borrower seeks debt discharge. If you’re concerned about how bankruptcy could affect your co-signer, it’s wise to speak with an experienced bankruptcy attorney Miami residents trust.
Understanding Co-Signer Liability
A co-signer is someone who agrees to repay a loan if the primary borrower defaults. This arrangement is common when the primary borrower has limited credit history or income. If the primary borrower files for bankruptcy, the co-signer’s obligation doesn’t automatically disappear.
Chapter 7 Bankruptcy and Co-Signers
In a Chapter 7 bankruptcy, the debtor seeks to discharge unsecured debts. While this relieves the debtor of personal liability, creditors may still pursue co-signers for repayment. The co-signer remains legally obligated unless the debt is paid off or settled.
Chapter 13 Bankruptcy and Co-Signers
Chapter 13 bankruptcy involves a repayment plan over three to five years. During this period, a “co-debtor stay” may protect co-signers from collection efforts, provided the debtor continues to make payments. However, if the debtor fails to adhere to the plan, creditors can resume collection from co-signers.
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This is one of many reasons why consulting a bankruptcy attorney Miami locals recommend is critical. A seasoned attorney can review the terms of your debt and provide guidance on how to mitigate the impact on your co-signer. They can also help you weigh the pros and cons of filing under Chapter 7 or Chapter 13 based on your situation and goals.
Protecting Co-Signers
To safeguard co-signers, debtors can consider reaffirming the debt, meaning they agree to repay it despite the bankruptcy. Alternatively, paying off the debt or ensuring it’s included in the repayment plan can prevent creditors from targeting co-signers.
If you’re considering bankruptcy and have co-signers on any of your debts, proactive legal advice is essential. Visit our Chapter 13 Bankruptcy page to explore how this form of relief works and whether it can help you protect both yourself and your co-signers.
To learn more about your rights and options, reach out to a dedicated bankruptcy attorney Miami individuals count on for clear guidance and compassionate service.
For personalized advice on managing co-signed debts during bankruptcy, consult with our experienced attorneys at the Bankruptcy Law Offices of James Schwitalla, P.A..