I have had a lot of clients who see a certain debt on their credit report, and say they are “just a co-signer”, or that someone else is “the primary”, as though the creditor would have an obligation to pursue that person first. Unfortunately, that is not the case. When two individuals co-sign on a loan, each of them is equally responsible for ensuring that the required payments are made. If either misses a payment, the creditor is free to pursue whomever they want to get the payments (by contacting, suing, garnishing wages, etc.). There is no requirement that they go after one person before the other.
Another rumor that I’ve heard about co-signing is that each co-signer is only responsible for half of the debt. This is also false. Each co-signer is separately on the hook for the entire amount of the debt. Now, this doesn’t mean that the creditor can collect the full amount from both co-signers at the same time, and essentially get paid twice what they’re owed. It does, however, mean that they can choose who they collect from, and how much they collect from each individual, up to the total amount of the debt.
However, when you file a Chapter 7 bankruptcy, your responsibility for the debt is discharged or removed. This means that the creditor can only collect from the co-signor. You can voluntarily repay a co-signed debt after a Chapter 7 bankruptcy but the creditor cannot force you to pay unless it is a debt that survives the bankruptcy, like a tax debt or student loan.
It is very important that you notify your attorney if you have co-signed debts when filing a Chapter 7 bankruptcy.
If a creditor is coming after you for a debt that you co-signed for someone else, we can help you. Contact us or call us today at 757-276-6555 for a free consultation on how bankruptcy can help you deal with a creditor who is trying to collect on a co-signed loan.