The decision to file for bankruptcy isn’t one that most people take lightly, especially if that decision will affect others. An example of how your bankruptcy could affect others is if there is a co-signer on one or more of your debts. In cases for which there is a co-signer, the obligation to repay the debt might still fall on your co-signer, even if your bankruptcy is granted. Whether it does or not is usually dependent on whether you file Chapter 7 or Chapter 13.
In a Chapter 7 bankruptcy, your co-signer will likely be left with the responsibility of paying the debt, and it will likely not be discharged for him/her, even if it is discharged for you. This means that you will no longer have the responsibility of paying it, but your co-signer will. This type of situation can cause conflict among people if not carefully discussed, particularly if the co-signer is a close friend or family member with whom you have a lot of contact.
In a Chapter 13 bankruptcy, your debts will not be completely discharged, but will rather be rearranged and placed on a court-mandated repayment plan. If you make these payments on time, your co-signer will be under what is called a "co-debtor stay” and will not be held responsible for any of the debt while you pay it off. They will also not be responsible for any discrepancy in the amount of debt owed before the bankruptcy and the final amount the court orders you to pay for that debt.
Before you file for bankruptcy, it is important to remember that whatever debt you have in which a co-signer has signed with you, your late payments or missed payments will affect their credit negatively. Co-signers often have a better credit rating than the primary signer, making their own score more vulnerable to taking hits when they agree to co-sign. This is why you should be extremely cautious in asking someone to co-sign with you; if you are unable to pay the debt, it might result to a conflict between the two of you.
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