Having a co-signer can be tremendously beneficial when you're applying for a loan. It can often help you if your credit score is low or if you're just starting to build your credit. With that in mind, a co-signer is placing him or herself at risk, especially if the other person runs into money troubles. What happens if a co-signer ultimately decides to file for bankruptcy?
In a Chapter 13 bankruptcy, an individual is allowed to develop a repayment plan, which specifically addresses the co-debtor or co-signer, protecting them and ensuring that creditors cannot negatively affect the other person involved. If the co-signer filed for Chapter 13 bankruptcy and you're not being allowed to make payments, you may have some legal claim leeway. A Chapter 7 bankruptcy, on the other hand, makes things trickier as protection of third-party guarantors is not always allowed.
Should a co-signer file for bankruptcy, it's essential that you keep an eye on your credit report. If the account shows up as being included in bankruptcy, then you may wish to dispute this and make it a point that bankruptcy was not in fact declared. If the report does not show a bankruptcy public record in the report, the account's bankruptcy status can be removed.
This bankruptcy update is provided to you by Fort Lauderdale bankruptcy attorney Bigge & Rodriguez, P.A. If you need a or have questions about Chapter 7 or 13 bankruptcy, call 954.400.7322 to speak with us. We also specialize in foreclosure defense.