Struggling with debt and considering Chapter 13 bankruptcy? If you have a co-signer on a loan, you might be wondering how the process will impact them. Here's a breakdown of what to expect:

Good News for Co-signers

Chapter 13 offers significant advantages for co-signers compared to Chapter 7 liquidation. By filing for Chapter 13 and consulting with an attorney, you can potentially protect your co-signer from significant financial hardship while working towards a solution for your debt.

Automatic Stay

Filing for Chapter 13 triggers a powerful tool called the “automatic stay” that halts creditor collection efforts against both you and your co-signer. This provides them with a much-needed break from harassing phone calls and lawsuits. Ideally, your Chapter 13 repayment plan, outlining how you'll repay debts over 3-5 years, will include payments towards the co-signed loan. If the plan successfully pays the entire debt, your co-signer is completely off the hook. Even if the plan doesn't cover everything, their liability is limited to the remaining balance after your discharge.

There are a few exceptions to these protections. If the creditor can prove your co-signer directly benefitted from the loan, the automatic stay might not apply to them. Additionally, if your Chapter 13 case gets dismissed or converted to a Chapter 7, the automatic stay is lifted, and creditors can resume collection efforts against your co-signer.

What Your Co-signer Can Expect

Your co-signer will receive a notification from the bankruptcy court and may be contacted by the creditor to confirm the debt amount or inquire about the loan's status within your repayment plan. In some cases, if the plan doesn't cover the entire debt, they might be responsible for the remaining balance after your discharge.

Transparency and Communication are Key

While Chapter 13 offers some relief, it's crucial to be upfront and communicative with your co-signer throughout the process. When you call The Craig Black Law firm at (678) 888-1778, you'll get to speak with Craig himself. You'll getspecific information that helps you understand exactly what the impact will be on your co-signer. Craig Black will craft a repayment plan that prioritizes paying off the co-signed debt, and he'll advise you on how to best communicate the situation with your co-signer and manage their expectations.