Are Co-signers Protected in a Chapter 7 Bankruptcy?

Co-signing is a common practice.  Borrowers with limited credit or weak scores often seek out someone with a stronger credit score to strength their loan application.  Parents co-sign for loans for their children.  Spouses and domestic partners also co-sign for major purchases, such as mortgages. Once you co-sign for a debt, you are on just as responsible for its repayment as the main debtor. Typically co-signers, or co-debtors as they are known under the Bankruptcy Code, are not protected under Chapter 7.

This means that if you co-signed for a debt and the main debtor files for bankruptcy, or vice versa, the protections afforded by Chapter 7 are not extended to the non-filing co-debtor.  Once creditors are notified that one debtor on a co-signed debt has filed for Chapter 7 and will eventually receive a discharge, they are legally able to go after the co-debtor solely for that debt.

Co-signing for a debt is a serious obligation and should be carefully considered.  If you are considering Chapter 7 because of primary or co-signed debts, a Fears | Nachawati bankruptcy attorney is available to consult you and discuss your options.