Can My Son’s Bankruptcy Harm Me Financially?

Having a family member go through bankruptcy can certainly be a disruptive event for everyone; however, unless your name and social security number are on debts that your son accrued before the bankruptcy, you will not be financially harmed. 

Still, there are some possible problems you might want to consider.  For example, once your son’s bankruptcy is discharged, it will be difficult for him to get credit, qualify for a mortgage or possibly even rent an apartment, so it is highly likely that you, as a concerned parent, will want to accept a request to co-sign.  In this situation, there are definitely some factors to take into consideration that could potentially harm you financially.

When a co-signer is on a loan, the lender will typically file a lawsuit against that person first to recoup money, especially considering that the co-signer is much more likely to have greater financial resources and job stability (which is why they were needed to co-sign in the first place).  This means that should your son’s financial history repeat itself, you will likely be stuck with lawsuits that could be devastating for your credit rating and court judgments that are your responsibility to pay.

Knowing this, if you still decide to co-sign, do so with caution and moderation in mind.  This means that if your son is purchasing a car and you are co-signing for it, be sure that it’s in a lower price range (under $8,000) and over a long enough period of time. This way, should you be forced to take over payments, they will be low and not affect your monthly budget so much.

 

The best way to enter into a co-signing agreement with a family member who has recently gone through a bankruptcy is to consider it a loan you will likely have to repay.  If you think of it that way, you’ll be able to make a much more financially sound decision concerning whether or not you should co-sign in the first place.