Can I File for Bankruptcy if I Owe Money to a Loved One?
If you are considering personal bankruptcy, especially a Chapter 7 liquidation bankruptcy, owing money to a close friend or family member can put you and your loved one in a very difficult position. While it can be much easier to seek a discharge of debt you owe to a seemingly nameless creditor, realizing that your debt can pose problems for a friend or family member can be much more complicated if you are seeking a bankruptcy discharge. How often does this kind of situation arise? What are your options if you want to file for Chapter 7 bankruptcy but you do not want to negatively affect a friend or family member who is now linked to your debt?
Friends and Family Members are Negatively Affected by Financial Issues More Frequently Than You Might Think
According to an article in Bankrate, more people borrow money from loved ones or ask loved ones to serve as co-signers on loans than you might think. With some frequency, those friends and family members ultimately end up bearing the burden of the debt.
Indeed, Bankrate reports that about 60% of adults in the U.S. “have helped out a friend or family member by lending cash with the expectation of being paid back, while 17% have lent their credit card and 21% have co-signed for a financial product like a loan or rental. However, approximately 35% of those people who lent money or a credit card, or served as a co-signer, “were negatively impacted, resulting in lost money, a damaged credit score or harmed relationship.”
Most people want to avoid ending up in this kind of situation, yet personal bankruptcy also might be the best option for many consumers who are struggling with debt. What will happen to these debts in a Chapter 7 bankruptcy case, and what options do you have?
Friends or Family Members Still May Owe Certain Debts After Your Bankruptcy
Depending upon the type of debt you owe that is linked to a close friend or family member, you should know that your loved one could end up being responsible for debts you incurred after your bankruptcy case even if those debts are discharged for you. Most notably, any debt that has been co-signed will not be wiped out or discharged for your co-signer if you file for bankruptcy. Your co-signer will still owe that debt even if you come out of the bankruptcy process without any remaining debts.
Similarly, if you borrowed the credit card of a friend or a family member and owe that debt, you will not be able to have this debt discharged in your Chapter 7 bankruptcy case. Rather, the owner of the credit card will continue to owe the debt.
Enter Into a Reaffirmation Agreement or Other Type of Agreement
If you have a cosigner on a loan, you can still file for Chapter 7 bankruptcy, but you may want to enter into a reaffirmation agreement so that you still owe that debt once the bankruptcy case is finalized. As such, your co-signer will not necessarily be the only one responsible for repaying the debt. For other types of debt, such as a cash loan or credit card debt on a loved one’s credit card, you can enter into a separate agreement with that person to show that you promise to pay the debt even after your bankruptcy discharge.
Contact an Oak Park Bankruptcy Lawyer for More Information
Do you have questions about debt and Chapter 7 bankruptcy? One of our experienced Oak Park bankruptcy attorneys can help. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:
Filing Consumer Bankruptcy for Personal Guarantees
What is a Charged-Off Debt?
Friends and Family Members are Negatively Affected by Financial Issues More Frequently Than You Might Think
According to an article in Bankrate, more people borrow money from loved ones or ask loved ones to serve as co-signers on loans than you might think. With some frequency, those friends and family members ultimately end up bearing the burden of the debt.
Indeed, Bankrate reports that about 60% of adults in the U.S. “have helped out a friend or family member by lending cash with the expectation of being paid back, while 17% have lent their credit card and 21% have co-signed for a financial product like a loan or rental. However, approximately 35% of those people who lent money or a credit card, or served as a co-signer, “were negatively impacted, resulting in lost money, a damaged credit score or harmed relationship.”
Most people want to avoid ending up in this kind of situation, yet personal bankruptcy also might be the best option for many consumers who are struggling with debt. What will happen to these debts in a Chapter 7 bankruptcy case, and what options do you have?
Friends or Family Members Still May Owe Certain Debts After Your Bankruptcy
Depending upon the type of debt you owe that is linked to a close friend or family member, you should know that your loved one could end up being responsible for debts you incurred after your bankruptcy case even if those debts are discharged for you. Most notably, any debt that has been co-signed will not be wiped out or discharged for your co-signer if you file for bankruptcy. Your co-signer will still owe that debt even if you come out of the bankruptcy process without any remaining debts.
Similarly, if you borrowed the credit card of a friend or a family member and owe that debt, you will not be able to have this debt discharged in your Chapter 7 bankruptcy case. Rather, the owner of the credit card will continue to owe the debt.
Enter Into a Reaffirmation Agreement or Other Type of Agreement
If you have a cosigner on a loan, you can still file for Chapter 7 bankruptcy, but you may want to enter into a reaffirmation agreement so that you still owe that debt once the bankruptcy case is finalized. As such, your co-signer will not necessarily be the only one responsible for repaying the debt. For other types of debt, such as a cash loan or credit card debt on a loved one’s credit card, you can enter into a separate agreement with that person to show that you promise to pay the debt even after your bankruptcy discharge.
Contact an Oak Park Bankruptcy Lawyer for More Information
Do you have questions about debt and Chapter 7 bankruptcy? One of our experienced Oak Park bankruptcy attorneys can help. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:
Filing Consumer Bankruptcy for Personal Guarantees
What is a Charged-Off Debt?
Comments
Post a Comment