Is a co-signer liable in a chapter 13 bankruptcy?

When filing bankruptcy, it is critical to consider the very specific results of that action on your co-signers. A co-signer is someone that has agreed to accept the responsibility to repay the debt if you fail to do so. It is common to enter these types of loans with lenders for vehicles as well as homes. If you plan to file Chapter 7 bankruptcy, your co-signer could be held liable for the debt. However, in Chapter 13, the co-signer may be protected.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy does provide the co-signer with additional protections. However, this only applies when you are reaffirming the debt or when you are paying the debt off during the bankruptcy. If this is not the case, it is possible that the co-signer will be responsible for the debt, such as in the instance of a credit card.

Keep the following in mind when you are filing bankruptcy.

• This is not true in most types of business debts. The debt must be a personal debt to be protected.
• The co-signer is not able to receive any proceeds from the debt itself.
• The bankruptcy plan must require full payment towards the debt, not a discharge of that debt.

In short, most co-signers are protected only if you file a Chapter 13 bankruptcy.

Hire an Attorney

To ensure that you are protecting your co-signers, hire an attorney to file the Chapter 13 bankruptcy for you. The attorney will also help ensure other property and debts are properly organized in the bankruptcy.