Nearly everyone has had to have a cosigner at some point in their lives. Agreeing to back you up on a loan or line of credit is a significant favor, and one which should be respected. When you file for Chapter 7 bankruptcy, your creditors may try to go after your cosigners for the debts, but there are ways of protecting them.
How Does Your Bankruptcy Affect Cosigners?
When you file for Chapter 7 bankruptcy, your obligation to repay most or all of your debts is discharged. However, the debt itself is not technically discharged, and because your cosigners agreed to share the responsibility of the debt, they could be on the hook after you’ve gotten your discharge.
How Can You Protect Cosigners in Chapter 7 Bankruptcy?
There are a couple of ways that you can spare your cosigners from the coming creditor harassment, including:
- Reaffirmation – This is probably the least desirable option, because it waives your right to a bankruptcy discharge of a particular debt. Essentially, reaffirmation means that you have to sign an agreement to continue paying the debt after the rest of your debt is discharged.
- Pay the Debt – Even after your bankruptcy discharge eliminates your obligation to continue paying a debt, you can still make payments. To prevent creditors from pursuing your friends and family, you could simply repay the debt following your discharge without signing a reaffirmation agreement. This is usually a better option because it allows you to protect your cosigner without actually making yourself legally liable again.
Chapter 7 bankruptcy is often the best solution for people struggling with debt. Most people who file receive a discharge within a few months, and typically never have to give up any of their assets due to numerous exemptions. A bankruptcy attorney can offer you more information about how Chapter 7 bankruptcy could be right for you as well as how to protect any cosigners once you’ve filed.