It is extremely common for family members or significant others to co-sign a vehicle or other type of loan to help out someone close to them in need. A frequent concern that our clients have is what happens to their loved one who has agreed to co-sign their loan if they attempt to discharge that debt when filing bankruptcy in Lebanon Missouri?
The filing of a bankruptcy by an individual, or a jointly filed bankruptcy with a spouse, typically will result in a “discharge” of most debts owed by the individuals who filed the bankruptcy unless the debts are specifically excepted from discharge under federal law. Examples of this include domestic support obligations, money secured by fraud, certain fines and penalties owed to the government, etc.
The bankruptcy discharge, therefore, does not protect any other individual from future collection of debt who may have co-signed on a debt with the bankruptcy filer. A creditor would be free to continue to collect on a delinquent debt from the co-signer while unable to pursue the individual who filed the bankruptcy and received his or her discharge.
If you believe that bankruptcy may be a beneficial option for you, it is extremely important to notify your attorney of any co-signer you might have on any of your debts. A knowledgeable bankruptcy attorney in Lebanon Missouri can provide clients with advice on how filing bankruptcy may impact any co-debtor.