Bankruptcy and co-signers
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Bankruptcy and co-signers
I am filing chapter 7 in Idaho and I currently have a car loan with my father as a co-signer. I am current on all payments What will happen to the loan? Will it affect my father?
Asked on June 23, 2009 under Bankruptcy Law, Idaho
Answers:
MD, Member, California Bar / FreeAdvice Contributing Attorney
Answered 14 years ago | Contributor
Your father is a surety on the loan. You need to check with your bankruptcy attorney to determine if your father's credit will be impacted, as it usually is when he is a co-signer on a loan. Review the following from freeadvice.com: How does filing bankruptcy affect a co-signer?
The Bankruptcy Code uses the term "codebtor" to describe an individual who is also liable for a debt. A bankruptcy discharge doesn't eliminate the liability of a codebtor. There is, however, a "codebtor stay" in Chapter 13 cases that prevents creditors from pursuing rights against codebtors until the case is closed, which may be three or even five years after the petition is filed. There are exceptions to the codebtor stay, however. If the codebtor is the one who actually got the "consideration" for the debt (e.g., you cosigned a car loan for your daughter, who actually owns the car), if your Chapter 13 plan proposes not to pay the debt, or if the creditor's interests would be irreparably harmed by continuation of the codebtor stay, the creditor can seek relief from the court. And, if your debt arose in the ordinary course of business (as when you cosign an ordinary course loan to a corporation you control), there is no codebtor stay in the first place.
(Reviewed 11.14.08)
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