When you choose to file for Chapter 7 bankruptcy, you will receive a discharge of your debts if the trustee approves everything in your case. The discharge offered to you can relieve you of a lot of your financial burdens, but there is something really important you should know if you have cosigners on any of your debts.
What is a cosigner?
A cosigner is a person who take responsibility for paying debts of another person, and people often need cosigners when their credit is not good enough on its own to qualify for a loan. If you ever needed a loan and asked someone to cosign for you, this person probably understands that he or she will be responsible for your debt if you fail to pay it. Your creditors will not only come after you for payment, if you miss any payments, but they will also come after your cosigner.
What happens to your cosigners if you file for Chapter 7?
If you decide to use Chapter 7 bankruptcy, you should understand the effects this will have on your cosigners. A Chapter 7 case will offer forgiveness of qualifying debts to the person filing. For example, if you have a $10,000 balance on a credit card, filing for Chapter 7 would most likely eliminate this debt for you. If a person cosigned for this credit card, the credit card company would come after him or her for this debt. The credit card company could not come after you if you file for Chapter 7, but you filing for Chapter 7 does not simply erase the debt completely. Your cosigner will still be responsible to pay it.
What could you do to solve this problem?
There are several ways you could handle this situation if you want to file for Chapter 7 but have a cosigner. The first option is just to go ahead and file and not worry about the effects it will have on your cosigner, but this is probably not the best way to handle the situation. The only other option you really have is to file for bankruptcy and repay the cosigner the money for this particular debt. If you do not want to use these methods, you could just decide not to file for bankruptcy and look for another way out.
If you have cosigners on your debts and want to file for Chapter 7, talk to them and to a bankruptcy lawyer to find out what you should do. To schedule a visit with a lawyer, contact a local bankruptcy law firm today.