Can I File Bankruptcy Without Hurting My Co-Signer?
You are drowning in debt, but a friend or relative co-signed on your car or other asset. Now what?
You could likely pay this specific debt if you didn’t have all your other credit card and medical bills crushing you. But the big question remains: “What about my co-signer? I don’t want to hurt them or their credit.”
The Good News: You Can Protect Them
You can file bankruptcy and still protect the co-signer. However, there is a specific way that must happen.
The Rule: You Must Keep Paying
To protect the co-signer and their credit, you have to keep paying the loan on that asset.
Here is how the legal mechanism works:
Your Liability: You will be discharged from the legal obligation to pay on the debt.
Their Liability: Your co-signer won’t be discharged.
This means that while the court says you don’t legally have to pay, in order to protect your co-signer, you have to pay the loan—or they do.
What Happens If You Stop Paying?
If you do not care about the co-signer, then you can stop paying. However, the consequences for them are severe:
- That person becomes fully liable for the debt.
- If they do not pay, the asset (like the car) will be repossessed.
- The co-signer will be fully and solely liable for the remaining balance.
Don’t leave your co-signer in the dark. Contact Moseman Law Office to create a plan that clears your debt while protecting your loved ones.