If you have agreed to co-sign on a debt with a friend, partner, relative, or ex-spouse you may be in an unfortunate situation if the other person has stopped paying on the debt. When you co-sign for a loan you are as liable for the resulting debt as the person you are helping out.
The creditor will attempt to collect payments from both parties on the contract. Creditor collection efforts can include letters, telephone calls, court action, and garnishment of wages or bank accounts. The creditor will attempt all collection efforts against you as if you were the only person liable on the debt.
If you are unable to pay on the co-signed debt, you need to be aware that a creditor can be awarded a judgment against you by a local judge. Once the creditor is awarded the judgment they are likely to attempt a wage garnishment or garnish your bank accounts.
If you are struggling with your debts, bankruptcy may be the relief you need. You can include co-signed debts in either a chapter 7 or chapter 13 bankruptcy. If you file a chapter 7 bankruptcy, the debt will be discharged with other debt such as medical, credit card, or repossession debt. In a chapter 13 the debt will be discharged at the completion of your repayment plan, which will be between 3 – 5 years depending on your situation.
If the loan or debt is secured by property, such as a vehicle, the creditor will be entitled to repossess the vehicle from you or the other debtor. If you wish to keep the property, you will need to pay the creditor as agreed upon. The creditor will still be able to pursue payment from the other debtor on the loan. Only your liability to repay the debt will be forgiven through your bankruptcy case.
If you feel bankruptcy is an option you need to consider, please contact our Kansas City bankruptcy attorneys for a free consultation.