Q: If I co-signed for my nephew and he filed bankruptcy, am I liable to pay his debt?
A:
Generally, when the primary debtor files for Chapter 7 bankruptcy, a co-signer will be liable for the debt. When the primary debtor files for bankruptcy, an automatic stay will usually be entered. The stay prevents the creditor from attempting to collect from the debtor who has filed for bankruptcy protection, but the stay doesn't protect co-signers, so creditors will often turn to the co-signer for payment (and the law typically allows them to do so).
Chapter 13 bankruptcy works a bit differently. Since Chapter 13 includes a payment plan, the automatic stay extends to protect most co-signers while the primary debtor makes payments under the plan.
Kevin Chern is an Illinois licensed attorney who has practiced in federal consumer bankruptcy law and consumer protection law for the last 21 years. He is the Managing Partner of UpRight Law. Kevin's law partners are licensed in all 50 states and work in conjunction with Mr. Chern to provide bankruptcy and consumer legal services in all 50 states. Mr. Chern's answers to the questions are intended for informational purposes only and are not intended to be legal advice. Use of the answers does not establish any attorney-client relationship. For legal advice, you should consult with an attorney licensed to practice law in your state and with appropriate expertise.
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