When you file a Chapter 7 bankruptcy, all collection activities against you must stop because of the bankruptcy’s automatic stay. However, the Chapter 7 automatic stay doesn’t extend to your cosigners and guarantors. So your creditors are free to pursue them to collect the debt.
How does a foreclosure affect a cosigner?
Mortgage Foreclosure Depending on the state, a foreclosed mortgage can end in the borrower and any cosigner escaping further payment obligations. For example, cosigners on foreclosed mortgages may not be able to qualify for mortgages or auto loans and also will have poor credit for several years.
What happens to your cosigners in a Chapter 7 bankruptcy?
However, the Chapter 7 automatic stay doesn’t extend to your cosigners and guarantors. So your creditors are free to pursue them to collect the debt. Even if you decide to file a Chapter 7 bankruptcy, you can take steps to protect your cosigners and guarantors from collection efforts by creditors.
What happens to my cosigner If I file Chapter 13?
Plus, you get more time to pay off the cosigned or guaranteed debt through your three- to five-year Chapter 13 repayment plan. When you file a Chapter 13, the automatic stay protects cosigners and guarantors from creditors collecting on consumer (nonbusiness) debts—called the Chapter 13 codebtor stay.
What happens to codebtor stay in Chapter 7 bankruptcy?
These issues aren’t the only problems you might face. The Chapter 13 codebtor stay will also end if your case is closed, dismissed, or converted to a Chapter 7 bankruptcy. A knowledgeable bankruptcy lawyer can advise you of the course of action most likely to achieve your goals.
Can a creditor pursue a cosigner at any time?
For instance, a creditor can pursue a cosigner at any time. But with guarantors, creditors usually must attempt to collect from the primary borrower first before going after the guarantor. The guarantor must make the lender whole (pay off the loan) if the borrower can’t do so.
