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Bankruptcy Won’t Discharge A Co-Signer’s Debt

There are many situations where someone, particularly someone who has a poor or unestablished credit history, is unable to get a loan or line of credit without a cosigner. A cosigner is someone who agrees to be on the hook for the debts incurred by the person that they are cosigning for. Parents act as cosigners for their adult children on student loans, siblings might act as a cosigner for one another, and sometimes even friends agree to be cosigners. The trouble with being or holding a debt with a cosigner is that if you file for bankruptcy, your cosigner can still be on the hook for the debt you owe. There are risks to being a cosigner.

Debts that are shared between someone who is filing for bankruptcy and someone who is a cosigner can cause trouble in a bankruptcy proceeding. While the debtor and the cosigner share the debt and the debt is discharged in the bankruptcy, only the debtor benefits and the cosigner gets stuck with the whole bill. This is because bankruptcy only discharges a person’s responsibility to repay a debt, but not necessarily the amount of debt. So if there is someone else, such as a cosigner, on the debt, the creditors will demand to collect the entire amount owed from the unfortunate cosigner.

Discharging A Cosigned Debt Can Create Problems

Discharging a cosigned debt through bankruptcy can cause problems between you and your cosigner. It could pose a trust issue, your cosigner could feel like you let them down, or it could seriously burden someone you love and care about.

Is There A Way To Protect A Cosigner?

There are options for protecting cosigners from creditors during a bankruptcy, and if you are worried about how your bankruptcy will affect your debt cosigners, then it is important that you explore these options.

  • Pay Your Share Of The Debt, Even If It Is Discharged in Bankruptcy. One way to protect your cosigner is to make your share of the debt payments even if your responsibility for the debt is discharged during bankruptcy. This lightens the burden of the debt for your cosigner and allows you to get rid of your debt obligation, even if it is only on paper.
  • Reaffirm the Debt. If you opt to reaffirm the cosigned debt, you effectively exclude that cosigned debt from being discharged as part of your bankruptcy proceeding. This means that you will still be obligated to pay this debt off with your cosigner, even if you go through bankruptcy.

Let An Experienced Bankruptcy Lawyer Help You, Contact Us

Bankruptcy cases where cosigners are involved can be tricky as there are unique issues involved in such situations. Consider contacting an experienced Michigan bankruptcy lawyer like the ones at the office of Karen E. Evangelista, PC, to help you figure out what you can do to help protect the cosigners on your debts. Please feel free to contact us today at 248-652-7990.


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