If a Family Member Cosigned a Loan, Can I Still File for Bankruptcy?

When you are considering the possibility of consumer bankruptcy, it is important to work with an Oak Park bankruptcy lawyer to ensure that the bankruptcy process goes smoothly and to identify any potential issues that may arise in your bankruptcy case. One such issue, depending upon your circumstances, is a loan or line of credit with a cosigner. If you do have a cosigner or a guarantor on any debt, it is critical to understand that your bankruptcy case could negatively impact your cosigner if you do not take certain steps in advance. As you likely know if you do have a cosigner or a guarantor, a cosigner is necessary in situations in which you cannot obtain a loan alone with your credit profile and history. Accordingly, in order to get the loan or line of credit, you might ask a family member with good credit to act as a cosigner for you. In such situations, you might be wondering if you are still eligible to file for bankruptcy.

You can certainly file for bankruptcy and receive a discharge for eligible debt that has a cosigner, but your cosigner will still be liable unless you take action. We will provide you with more information about cosigners and bankruptcy under U.S. bankruptcy law, but it is important to seek advice about your particular situation from a bankruptcy attorney.

What is a Cosigner or Guarantor?

A cosigner is someone who agrees to be responsible for your debt (in addition to you) if you do not repay a loan. Lenders ask for cosigners or guarantors in situations where they are concerned about the borrower’s ability to repay a loan. As such, the lender might only agree to give the loan or line of credit if the borrower can find a cosigner whom the lender believes is creditworthy, or is likely to repay the loan.

Cosigners and guarantors are not references for you to receive a loan. To be clear, a cosigner or guarantor is responsible for the debt. What is the difference between a cosigner and a guarantor? A cosigner is responsible, like the borrower, for making each payment associated with the debt. A guarantor is responsible for the debt if the borrower does not repay the debt. What this distinction means is that a lender or creditor can take action against a cosigner to recoup even one missing payment, while a lender or creditor can only go after a guarantor after unsuccessfully attempting to collect the debt from the borrower.

How Cosigners and Guarantors are Impacted in a Bankruptcy Case

If you are filing for Chapter 7 bankruptcy, you should know that seeking to have the cosigned debt discharged (or the debt for which you have a guarantor) will not discharge the debt for the cosigner or guarantor. To be clear, the cosigner or guarantor will still be obligated to repay the debt unless you reaffirm the debt or pay it off.

In a Chapter 13 bankruptcy case, you can include the cosigned debt in your reorganization plan so that you do make payments on the debt over a period of three to five years. However, if you will not pay off the debt in full through the terms of your repayment plan, your cosigner or guarantor will be responsible for the remaining debt unless you reaffirm it at the end of your Chapter 13 case or pay it off.

Contact a Bankruptcy Lawyer in Oak Park for Assistance

If you have questions about filing for bankruptcy with cosigned debt, one of our dedicated Oak Park consumer bankruptcy attorneys can assist you. Contact the Emerson Law Firm to speak with an advocate at our firm today.



See Related Blog Posts:

“Spike” in Consumer Bankruptcy Filings May Occur Soon

What is Reaffirmed Debt in a Bankruptcy Case?

Comments

Post a Comment

Popular posts from this blog

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti
Read more

Learning About Different Types of Wills

Whether you are young or old, single or married, wealthy or with limited financial means, healthy or dealing with a medical condition, it is important to make a will. Many people have incorrectly heard that wills are only necessary for particular people, such as those with a substantial amount of assets or for older adults in poor health. Yet wills are critical for adults of all ages, and an experienced Oak Park estate planning lawyer can help you to make one. Before you begin working with a lawyer on a will, you might start conducting your own research into wills in Illinois and the requirements for a valid will. In so doing, you are likely to come across information about many different types of wills, and you are probably going to wonder whether you will need more than one kind of will. In short, there are different terms that can be used to describe the form or function of a will, as well as some distinct types of wills. Our Oak Park estate planning attorneys can explain in more
Read more

Younger Parents Need an Estate Plan

It is critical for younger parents to have an estate plan, even if they know they are healthy and do not anticipate that anything will happen in the near future. Much too often, younger parents assume that they can wait until they are older to consider estate planning or until there is a health-related reason to begin the estate planning process. Yet estate planning is critically important for parents who have minor children. While estate planning is important for adults of all ages, it can allow parents to make important decisions about who will care for their children in the event that they become unable to do so themselves. Our Oak Park estate planning lawyers can explain in more detail. Naming a Guardian for Your Minor Children in Your Will Most importantly for younger parents, making a will allows you to name a guardian who can care for your child in the event of your unexpected death. Nobody anticipates a deadly accident or a sudden situation in which there is a need for another
Read more