Do you have a secured loan with a co-signer?
When you file Chapter 13 bankruptcy
there are a few ways that you can minimize or even eliminate future creditor actions against your non-filing co-signer.
Here are your options:
- You can return the property to the lender. For example, if you and a co-signer have a loan on a vehicle, you can surrender the vehicle to the creditor during bankruptcy. But beware; if the creditor is unable to recoup the full amount of the loan, they may go after your co-signer for the balance. If you choose this option, do your research to determine how much of a loan balance you will have after the property is sold.
- Your bankruptcy plan could provide for payment in full for the creditor which would protect your co-signer from future collection actions. You can even request that the loan with a co-signer is given a larger portion of your monthly payment. It's not guaranteed that the request will be granted; but it is a possible option.
- Modify the loan in bankruptcy. You may be able to change the terms of repayment to the lender. For example, maybe you will pay only the principal on the loan plus part of the interest. But once again, if you do this, the lender may still go after the co-signer for the balance.
Before filing for bankruptcy, it may be wise to discuss with your co-signer the possible impact on their finances.