Bankruptcy, Co-Signer

How Does Bankruptcy Affect a Co-Signer?

Co-signers and guarantors enter into an agreement that ties them into any related debts. That means if you file for bankruptcy it will impact on any co-signers. There are potential methods that can prevent creditors from chasing co-signers for debt. However, you should make sure you fully understand the process you are committing to when you file for bankruptcy.

What is a Co-signer?

A co-signer is someone who provides a reference for you when you take on debt. However, creditors will not merely take the word of a co-signer, they will expect guarantees that will affect a co-signer when it comes to the debt not being paid or the debtor filing for bankruptcy.

Creditors weigh the risk of lending against the reliability of the person borrowing. If you have a poor credit history, some creditors will still allow you to borrow as long as a co-signer agrees to honor the debt if you are unable to pay or file for bankruptcy. It makes no difference whether you are the first or secondary signer on a debt. Both parties who take on the debt are equally liable for that debt, unless there are specific limitations in the documents you signed.

How Does Bankruptcy Affect a Co-Signer?

A bankruptcy discharge only applies to your discharged debts, it does not affect a co-signer’s liability to pay the debt. The level of protection a co-signer is afforded is dependent on the chapter of bankruptcy.

A Chapter 7 bankruptcy affects a co-signer as the automatic stay on creditors is against your name, not the co-signer. Creditors can continue to contact the co-signer for payment. If you wish to provide protections for the co-signer, there are ways to do so. Reaffirming the debt, meaning you continue to make payments pursuant to contract terms, will ensure your co-signer is not left to pay the debt when you file for Chapter 7 bankruptcy.

There are more protections for a co-signer when you file for Chapter 13 bankruptcy. You will have a 3-5 year period to pay off the debt through your payment plan. Unlike a Chapter 7, the stay on creditors does affect your co-signers in a positive way, in that the protections are extended to the co-signers and creditors cannot pursue them for payment while the Chapter 13 case is pending. However, creditors will have the right to ask the court to lift the automatic stay as to co-signers. After the Chapter 13 case is complete, a co-signer is still liable for any amounts still owing under the contract signed by the co-signer. Many Chapter 13 cases also pay less than what is due under the contract, so you may need to place certain provisions in your Chapter 13 plan if you wish to protect a co-signer from owing anything once your Chapter 13 case is completed.

Complex Bankruptcies

From the perspective of the debtor, a bankruptcy that affects a co-signer is much more complex. The person in question is usually a family member or friend. The last thing a debtor usually wants is to leave a co-signer stuck with a debt. If you are facing bankruptcy and a co-signer is at risk of being pursued by your creditor, reach out to a bankruptcy lawyer in Georgia today. For the sake of your friendship or family relationships, make sure you know exactly how bankruptcy will affect a co-signer. Call the offices of H. Lehman Franklin P.C. in Georgia today for guidance on filing Chapter 7 or Chapter 13 bankruptcy. You can reach our legal team at 912-764-9616 or email at