Filing for Chapter 13 bankruptcy can significantly impact your finances and, importantly, the financial obligations of your cosigners. Understanding the implications for your cosigner is crucial before making this significant decision. This article will explore the potential consequences for your cosigner when you file for Chapter 13 bankruptcy.
Does Chapter 13 Bankruptcy Release My Cosigner?
No, Chapter 13 bankruptcy does not automatically release your cosigner from their responsibility on the debt. Chapter 13 reorganizes your debts, allowing you to make payments over a three-to-five-year period according to a court-approved plan. While you are obligated to make payments under the plan, your cosigner remains liable for the debt if you fail to meet your payment obligations.
What are the Responsibilities of a Cosigner in a Chapter 13 Bankruptcy?
Your cosigner's responsibilities depend on the terms of the original agreement and the specifics of your Chapter 13 bankruptcy plan. They remain fully liable for the debt if you default on your payments. This means creditors can pursue your cosigner for the full amount of the debt, even after you've filed for bankruptcy.
Can a Creditor Go After My Cosigner While I'm in Chapter 13?
Yes, even during your Chapter 13 proceedings, creditors could pursue your cosigner if you default on payments. This is because the bankruptcy protects you, not necessarily your cosigner. The creditor is still entitled to collect the debt. However, the creditor will likely wait to pursue the cosigner until after your bankruptcy plan has concluded, unless there is reason to believe the debt will not be paid.
What Happens to the Debt After Chapter 13 is Completed?
After you successfully complete your Chapter 13 plan, the debts included in the plan are discharged. However, this discharge only applies to you. Your cosigner remains responsible for any remaining unpaid balance. If the debt was not included in your Chapter 13 plan, the cosigner's responsibility remains unchanged.
How Can I Protect My Cosigner During Chapter 13?
The best way to protect your cosigner is to diligently adhere to the terms of your Chapter 13 repayment plan. Consistent and timely payments minimize the risk of the creditor pursuing your cosigner. Open and honest communication with your cosigner throughout the process is also essential.
Can My Cosigner File Bankruptcy Themselves?
If your cosigner is facing financial hardship due to your debt, they may choose to file for bankruptcy themselves. This is a separate bankruptcy filing and independent of your Chapter 13 case. This would protect them from creditors pursuing the debt, but it doesn't affect your obligations.
Is it better to file Chapter 7 or Chapter 13 if I have a cosigner?
The choice between Chapter 7 and Chapter 13 depends heavily on your individual financial situation. Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 allows for reorganization and repayment over time. Neither automatically releases a cosigner, but Chapter 13 gives you more control over your debt repayment and might help you avoid defaulting, thereby protecting your cosigner. It’s crucial to seek professional legal advice to determine the best course of action for your specific circumstances.
Disclaimer: This information is for educational purposes only and not legal advice. Filing for bankruptcy is a complex legal process, and it's imperative to consult with a bankruptcy attorney to understand your rights and options. The specific outcome will depend on the details of your case and the applicable laws.
