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What Happens When Co-Signer Files For Bankruptcy?

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Can I get credit after filing personal bankruptcy?”


Most people realize that co-signing on someone else’s loans has it risks, the person might not pay and you would then be stuck with the debt. But what happens if the person you asked to be your co-signer is having financial problems and ends up filing for bankruptcy? What will happen to you then? To find out more about what can happen when a co-signer files for bankruptcy protection, keep reading.


Cutting credit cards Charlotte Debt Lawyer Mecklenburg Bankruptcy AttorneyWhat changes?


It’s important to remember that the loan is your loan, not the loan of your co-signer. This means that the loan remains in your name and the lender is still counting on you to pay it back, no matter what happens to your co-signer. The co-signer’s decision to file for bankruptcy impacts his or her credit and loans, and you should not be punished as a result. As long as you continue to make your payments on time, your credit score should be unaffected. The problem comes if the co-signer was providing you with the money you needed to pay the loan. If that’s true, the decision to file could have a serious impact on you and your solvency. In this case, you’ll need to dig deep and find the money to remain in good standing. The lender won’t care that it’s the co-signer’s troubles that caused your own, all they will see is a late payment.


Inform the lender


It’s likely that the lender will realize the bankruptcy has happened quickly, maybe even before you know. Regardless, you should take the time to notify the lender of the bankruptcy and reaffirm your intention of paying the balance of the loan on time and in full. It’s best to do this as early as possible, as lenders can get nervous once they realize that a co-signer has filed for bankruptcy, something that essentially eliminates the insurance the lender thought they had.


Monitor your credit report


Even though the bankruptcy filing of a co-signer is not your responsibility, it is possible that your credit report could be changed as a result of the decision. Be careful and closely watch your credit report in the months after the co-signer files. Your credit report may show that a loan has gone into bankruptcy, even if the bankruptcy is only that of your co-signer. This is technically true and allowed, but this status should not damage your credit score as the bankruptcy was not your fault. If it does and your score drops, stay on top of it and dispute the credit report. Technically your score should not be lowered so long as payments continue to be made on time.


If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.



About the Author

Kyle Frost Bankruptcy Lawyer Student loan attorneyKyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology.  He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.

Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.

In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.







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