You decide to buy your first car with your first real paycheck out of college, because that’s what people do, right? You meet all the requirements, except you don’t have much credit history, so you beg your dad to co-sign for you. After all, it’s just a formality, right? Fast-forward three years later: You’re barely staying afloat paying off school loans, living expenses and your fancy new car. But if you file for bankruptcy, your dad will be on the hook for your debt.
Most people aren’t trying to throw their co-signers or joint account owners under the bus when filing for bankruptcy, but it happens. If Chapter 7 bankruptcy is your only option, then you have no choice. When you file and are protected from having to pay back your home loan, credit card, or car, the creditors will go after the other account owners or co-signers of the loans for repayment—even if you are granted a discharge of the debt. That’s because even if you get the discharge, the creditor is still out that money, and they have a legal right to get it back from the co-signer or account owner, as long as that individual isn’t protected by the automatic stay.
However, if our new grad from the cautionary tale above still has a job and any amount of disposable income, he can file for bankruptcy. In Chapter 13 bankruptcy, the debt is reorganized and sometimes negotiated down into a payment plan that is completed over the course of three to five years. Since the creditors do get repaid under this plan, cosigners are left alone. And when the debt is repaid, the cosigner is no longer liable after the bankruptcy case concludes. All you have to do is complete your plan on time. If you miss payments or get off track, your case is converted into a Chapter 7 and dad will start getting some nasty phone calls about those car payments.
Over the past 32 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can stop your garnishment and change your monthly payments for all your combined unsecured debt, and if you have had more than $600 garnished within the last 90 days, we can get all of the money back in most cases. But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.