If you are struggling with debt, you are probably the only one accountable for your outstanding amounts because the debts are in your name. As a result, only you have to worry about your student loans, your credit cards and your home or car payments. However, if another person has co-signed your debts, your creditors may come after your co-signer to pay them off.
If you have concerns that your debts may become someone else’s problem because a friend or family member had co-signed some of your debts, bankruptcy may provide a solution. According to Credit Karma, Chapter 13 bankruptcy may offer co-signers protection from creditor efforts to collect.
How co-signing works
The concept of co-signing a debt is pretty simple. A bank or a creditor might have doubts that you can pay back a loan or pay off a vehicle or a home. If this happens, you may ask a relative or a friend with a good credit history to sign the loan or agreement with you. If you cannot make a payment, the creditor will hold your co-signer responsible for your missed amount and any other fees you have failed to pay.
Protecting your co-signer
By filing for Chapter 13 bankruptcy, you may secure a hold on creditor efforts to collect money from you. This can bring you relief during a stressful time so that you may come up with a repayment plan to satisfy your creditors. If some of your debts had co-signers, the good news is that bankruptcy protection may also halt creditor efforts to collect from them. Basically, Chapter 13 should offer relief for both you and your co-signers.
Since Chapter 13 cases vary by the individuals who file for bankruptcy, it is still possible that a bankruptcy court may authorize creditors to contact your co-signer for payment. Coming up with a strong repayment plan, in addition to other options, might help you avoid this outcome.