Will Filing For Bankruptcy Hurt My Co-Debtor In New Jersey?

In this article, you will discover:

• Whether creditors can pursue your co-debtor after you file for bankruptcy.
• Whether a co-debtor can sue you for damages after filing Chapter 13.
• How to navigate concerns over how bankruptcy might impact a co-signor.

Can Creditors Pursue My Co-Debtor For The Full Debt Amount After I File For Bankruptcy?

Yes, a creditor can pursue your co-signor for the full debt amount once you receive your discharge. There is a co-debtor stay when you file bankruptcy, preventing a creditor from harassing them during the bankruptcy process. However, after you receive your discharge, a creditor can go after your co-debtor in state court. The bankruptcy does not protect the co-debtor in that event.

If My Bankruptcy Discharges The Original Debt, Can My Co-Debtor Come After Me Legally?

No, your co-debtor doesn’t have any rights to go after you legally. In fact, they don’t have any rights against you, as you’ve received the discharge of your debts. The discharge essentially protects you from being sued by your co-debtor.

Notes From The Field: When Clients Worry How Bankruptcy Would Impact A Close Friend Or Family Member Who Co-Signed Their Loan

If a client is worried about the impact of bankruptcy on a co-signor, I would inform my client that bankruptcy does not protect the co-signer, whether it’s a family member or friend. The client must consider that when filing for bankruptcy.

If the co-signing is in connection with a car loan, I would recommend they sign a reaffirmation agreement with the creditor. That means the debtor would still be obligated under the loan and retain the right to continue making the payments.

Once you do a reaffirmation agreement, you release the protection of bankruptcy as to that single debt. If the co-signed debts involve a credit card, I don’t usually recommend any kind of reaffirmation. You need to notify your co-signing friend or family member that the creditor may be coming after them.

Still Have Questions? Ready To Get Started?

For more information on bankruptcy’s effect on co-signers in New Jersey, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (732) 264-3880 today.