When you file Chapter 7 bankruptcy, secured and unsecured debts are discharged. Unsecured debts include credit card debts, medical debts, etc. Filing Chapter 7 bankruptcy also allows petitioners to keep property associated with secured debts such as houses or cars if they agree to repay the loan. But what happens when there is a cosigner on the debt?
Can You File Chapter 7 Bankruptcy If You Have a Cosigner on a Loan?
Yes, you can file Chapter 7 bankruptcy even if one or more of your debts has a cosigner, but your Chapter 7 bankruptcy does not relieve your cosigner of responsibility for the debt. If you file for Chapter 7 bankruptcy, and have a cosigner on a loan, the cosigner is still responsible for the debt. While Chapter 7 bankruptcy discharges most unsecured debts and allows you to keep property associated with secured debts (like your car or your home, etc.), a cosigner on a loan is still responsible for the debt. Bankruptcy does not eliminate a cosigner’s liability for the debt.
How Does a Chapter 7 Bankruptcy Discharge Work?
After successfully completing a Chapter 7 bankruptcy case, the court enters a discharge of your debts. The bankruptcy discharge applies to most unsecured debts, some tax obligations, and utilities. The bankruptcy discharge doesn’t typically apply to certain types of debt: student loans, child support, alimony, criminal fines or fees, etc. Once the discharge is entered, the bankruptcy petitioner’s liability for the debts is eliminated, but the debts themselves are not eliminated. Once the discharge is entered, your creditors can no longer collect from you on the debts.
Bankruptcy Discharge Applies to a Debtor’s Obligation for the Debt:
The discharge does not eliminate the debtor’s debt; it eliminates the debtor’s responsibility or liability for the debt. The bankruptcy discharge applies only to the bankruptcy petitioner. Liability for any debts included in the bankruptcy transfers to cosigners at the time of the discharge. The only exception is if the petitioner filed bankruptcy with their cosigner.
Bankruptcy Petitioners Are Required to Disclose Cosigners When Filing:
When petitioners file bankruptcy, they are required to list any co-debtors or co-borrowers on Schedule H. (This includes all cosigners on loans). Any co-signers are notified of the bankruptcy filing by the court.
If you have a cosigner and you need to file bankruptcy, please don’t hesitate to contact our experienced bankruptcy attorney to discuss your options. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. You are in good hands with Ken who is a certified Senior Consumer Bankruptcy Law Specialist.