Will Chapter 13 Bankruptcy Affect CoSigners of Auto Debt
If you are falling further and further behind on your credit card payments and other bills, you may be considering filing for bankruptcy. If you have a cosigner on your auto loan and you don’t want to hurt the credit of your cosigner, you may be able to protect your cosigner by filing a Chapter 13 bankruptcy. A cosigner is a person who is also liable for the loan you took out, simply because they were willing to risk their credit on your behalf.
Chapter 13 Bankruptcy And Auto Debt
When you file for bankruptcy, an automatic stay is placed on your creditors. They are no longer able to call you to try and collect on your debt. Once your debt has been discharged, your liability no longer exists. The problem is, the liability still exists for your cosigner and they are now the only person on your car loan who is responsible for paying off the debt. To protect your cosigner, you will need to file a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy.
Filing Chapter 13 Bankruptcy Can Protect Your Cosigner
Chapter 13 CoSigner Protection
Called a Chapter 13 codebtor stay, when you file for Chapter 13 bankruptcy, your cosigner will be protected against liability for the debt. You will be responsible for paying off any debt that involves your cosigner, or the bankruptcy will turn into a Chapter 7 or Chapter 11, and the stay will no longer be in place. If this occurs, your cosigner will become liable for the debt.
Anyone that you owe money to can request that the codebtor stay be removed for several reasons. If the cosigner actually is the one driving the car, or in possession of it, they’ll need to pay the debt. If you don’t agree to pay the debt back as part of your repayment plan the stay can also be lifted.
When you are considering bankruptcy and you have a cosigner, it’s time to call Clark & Washington at 770-691-1220 to set up an initial consultation. If you would like to read more about misconceptions about bankruptcy, explore our website.