What Happens With Co-Signed Debt in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is preferred by many debtors over Chapter 13 because it is quicker and it typically wipes out most or all consumer debts. However, there may be downsides to Chapter 7 bankruptcy even for debtors who qualify for it. For example, debt discharge in a Chapter 7 bankruptcy does not remove liability of a non-filing spouse or any other co-signer for debts also in that person's name.

All Debts Must Be Included in a Bankruptcy Filing

Do not make the mistake of thinking that you can simply omit a co-signed debt from your list of debts or neglect to report any payments that you are making when you file bankruptcy. Doing this could cause your bankruptcy to be thrown out by the court.

A Cooperative Co-Signer Can Bridge the Gap During Bankruptcy

Did your husband, mother, grandmother or boyfriend co-sign on your car loan? The creditor will hold the co-signer responsible for the loan even if you include it in your Chapter 7 bankruptcy. This may not be a problem if you and the co-signer collaborate well. As long as car payments and insurance are kept current, you will most likely be able to keep the car. An experienced Chapter 7 bankruptcy lawyer can advise you on how you and the co-signer can manage payments during your bankruptcy if your co-signer is willing to carry the burden for a time.

Otherwise, a Co-Signer Will Bear the Burden Just As Creditors Do

What if the co-signer is your estranged wife, husband, girlfriend or boyfriend and that person will not or cannot cooperate by making payments during your bankruptcy filing period? This is an example of the type of difficult situations that our attorneys have successfully navigated many clients through at Ledford & Wu.

Your co-signer may have no choice but to face the consequences of your bankruptcy filing just as your creditors will. Once your Chapter 7 bankruptcy is complete, you can voluntarily repay the co-signer. Until that point in time, you cannot treat the co-signer differently from any other creditor.

Co-Signed Debts? Contact an Experienced Chicago Chapter 7 Bankruptcy Lawyer

Get the answers that you need about co-signed debts and other concerns that stand in your way as you consider filing Chapter 7 bankruptcy. Do not let worries over co-signed debt stop you from getting the legal advice that you need. We may advise you to consider filing Chapter 13 bankruptcy in order to deal with unmanageable debt while protecting a co-signer. Even if you have co-signed loans, contact us today to schedule a free initial consultation if you are in need of debt relief — even if you have co-signed loans.

Keep in mind that only three lawyers in Chicago are certified in consumer bankruptcy by the American Board of Certification*. Two are partners at Ledford & Wu.

*The American Board of Certification is accredited by the American Bar Association and sponsored by the American Bankruptcy Institute and the Commercial Law League of America. Federal law recognizes board certification in bankruptcy. The Supreme Court of Illinois does not recognize certifications of specialties in the practice of law and the certificate, award or recognition is not a requirement to practice law in Illinois.

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

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