I co-signed on a loan for someone filing bankruptcy
So, either a friend (and they'd better be your Best Friend) or family member asked you to co-sign on a loan and you did. They just told you they're filing bankruptcy. What happens now? Well, you don't need me to tell you what a bad idea it is to ever co-sign for the debt of another; or do you? Once you've signed on the bottom line, you're liable for that debt if the bills go unpaid by the person who talked you into this contract.
When the co-signer files bankruptcy, the effect of the discharge is a permanent injunction that prevents the Creditors from collecting on the debt owed by the debtor. However, if there is a co-signer on the account, the Creditor is free to pursue collection efforts against the co-signer. You remain liable for the debt as the co-signor; if the person you signed for fails to make the payments. So, what can you do if the person you signed for files bankruptcy?
Depending upon the nature of the agreement you co-signed for, you will need to contact the Creditor immediately to discuss your options. If it's a vehicle loan and the value of the vehicle is less than what is owed, you'll be legally liable for any deficit owed. You can work out payments, if the Creditor will allow it. It is imperative that you take action immediately. You may even need to file for bankruptcy protection yourself, if you are not financially able to make the required payments on this debt.
Here's my advice. Do not co-sign for the debt of another, unless you can afford to buy what ever it is you're signing for; and, you wouldn't mind owning it in the event they fail to make their payments. You're new mantra needs to be, "Friends don't let friends co-sign for their debts."
