Imagine you’re already stressed about finances, and then your co-borrower files for bankruptcy. It can feel overwhelming, right? Knowing how joint debts are handled in this situation can make a big difference and help you manage this challenging time more effectively.
What are joint debts?
Joint debts are financial obligations shared by two or more individuals. In other words, both parties are equally responsible for repaying the debt. Join debts can include joint credit cards, mortgages and even car loans. The loan contract states that you and your co-borrower are liable for the debt, regardless of who uses the funds.
What happens if my co-borrower files for bankruptcy?
If your co-borrower files for bankruptcy and you don’t, you may be liable for paying back the creditor alone. When a person files for bankruptcy, they are automatically granted an injunction, known as an automatic stay. An automatic stay prevents creditors from pursuing collection actions against the person who filed bankruptcy. However, this protection does not extend to the co-borrower who did not file for bankruptcy. As a result, creditors can still seek repayment from you for the entire debt.
The next steps
If your co-borrower files for bankruptcy, you may be solely responsible for the entire debt. This can be a challenging situation, but there are a few things you can do.
First, try talking to your co-borrower. Understand their situation and discuss how it can impact your shared financial obligations. You can plan your next steps more effectively by talking to your co-borrower. Second, you may consult a legal professional to help you understand your rights and options. Lastly, negotiating with creditors can be a viable option. Creditors may be willing to work out a payment plan or settlement that is more manageable for you.
By proactively addressing the situation and seeking professional advice, you can more effectively navigate the challenges of joint debts during the bankruptcy process. An attorney may be able to help you understand your options and find financial relief.
