What Happens to Co-Signers During Bankruptcy?

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Navigating bankruptcy during financial difficulties can offer a fresh start, but it’s crucial to understand how this process impacts co-signers during bankruptcy. Many individuals are unaware that bankruptcy may erase personal debts but leaves co-signers accountable. In this article, we will explore the implications of bankruptcy on co-signers, with a focus on Chapter 7 and Chapter 13 bankruptcy options.

Chapter 7 Bankruptcy: Impact on Co-signers

In a Chapter 7 bankruptcy, your debts are discharged, providing you with much-needed relief from your financial burdens. However, the catch is that your co-signer, if you have one, won’t receive any protection from creditors either during or after your bankruptcy process.

The Vulnerability of Co-signers

When you file for Chapter 7, the primary purpose is to liquidate your assets to pay off as much of your debt as possible, and the remainder of the debt is forgiven. While this is beneficial for you as the debtor, it leaves your co-signer vulnerable. Creditors can still pursue them for the unpaid debt, as they are equally responsible for the loan.

Chapter 13 Bankruptcy: Benefits for Co-signers

Chapter 13 bankruptcy offers more protection to your co-signers. Under this type of bankruptcy, you develop a repayment plan to pay off your debts over a specified period, typically three to five years. This plan includes the co-signed debt, and any payments you make towards it during this period will contribute to reducing your co-signer’s liability.

Gradual Repayment

This is a significant advantage because it gives you the opportunity to gradually repay the debt without your co-signer facing harassment from creditors. While your co-signer may not be completely off the hook, Chapter 13 provides a more manageable path to address the co-signed debt.

Comparing Chapter 7 and Chapter 13 for Co-signers

Now that we’ve discussed the basics of both Chapter 7 and Chapter 13 bankruptcy, let’s compare how each affects co-signers.

1. Protection During Bankruptcy Proceedings

In a Chapter 7 bankruptcy, your co-signer receives no protection from creditors. However, in Chapter 13, the co-signer is shielded from creditor harassment as long as you stick to the repayment plan.

2. Repayment Period

Chapter 7 bankruptcy usually lasts a few months, while Chapter 13 extends over several years. The longer timeframe of Chapter 13 allows for gradual repayment of co-signed debts, easing the burden on your co-signer.

3. Impact on Co-signer’s Credit

Both types of bankruptcy may negatively impact your co-signer’s credit score. However, the Chapter 13 repayment plan may reflect more positively on their creditworthiness as they see consistent payments being made.

4. Automatic Stay

In both Chapter 7 and Chapter 13, the automatic stay comes into play. This legal provision protects co-signers and guarantors from creditors collecting on consumer debts while the bankruptcy case is ongoing. It provides a temporary reprieve, but the key difference is that Chapter 7 does not provide a long-term solution for your co-signer.


It’s essential to understand that when you file for bankruptcy, your co-signers remain liable for any co-signed debts. However, the level of protection they receive depends on whether you choose Chapter 7 or Chapter 13 bankruptcy.

If you want to provide more protection for your co-signers and have the means to gradually repay the co-signed debt, Chapter 13 may be the better option. It offers a structured plan to address the debt while giving your co-signer some peace of mind.

If you’re considering bankruptcy, it’s crucial to consult with a qualified bankruptcy attorney who can provide personalized advice based on your unique situation. They can help you understand the implications of your decision and guide you through the process.

If you would like more information, contact us at 913-422-0909 or visit our website www.kansascitybankruptcy.com. At W M LAW, we are “Here to Help”.

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Jeffrey L. Wagoner


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