When you take out a loan, you assume full responsibility for the debt. For many Phoenix residents who have struggled with their finances after the housing market crash and unemployment struggles, lenders may have been wary of their ability to pay the loan in full.
This does not mean that potential borrowers with shaky finances are automatically turned away, however. What many lenders will do (since they do not want to lose business) is require loan applicants with little to no credit or collateral to sign a lease with a cosigner. Cosigners are usually required to have very solid credit and finances, because they will be ultimately responsible for the debt if the primary borrower defaults.
How your cosigners are treated if your file for bankruptcy depends on a few things, primarily the type of bankruptcy your file for. In a Chapter 7 bankruptcy, the automatic stay goes into effect immediately after you file, protecting you from creditors. Your cosigners will not be protected, however, and collection actions will immediately be redirected to them.
This is why many people tend to turn to Chapter 13 bankruptcies. In most cases, both you and your cosigners will be protected in a Chapter 13 bankruptcy case, since you are committing to a repayment plan that will include your cosigned loans. While a Chapter 13 bankruptcy is a huge financial commitment, if you are truly dedicated to preserving your cosigner’s credit, it could be a good option if you will be able to complete the three or five year plan successfully.
If you are struggling to find a balance between what is best for you and your finances and what is best for your cosigners, let the Phoenix bankruptcy attorneys at Curry, Pearson & Wooten help. Our experienced team of lawyers can guide you through the bankruptcy process and allow you to weigh your options before diving headfirst into a huge financial decision. Call us today at 602-258-1000 for a consultation with an attorney now.