How Does Bankruptcy Affect Co-Signers on My Loans?

Filing for bankruptcy is a decision that not only impacts your financial situation but also has significant implications for co-signers on your loans.

Understanding how Chapter 7 or Chapter 13 bankruptcy affects co-signers is crucial for individuals contemplating this financial step.

This article provides a comprehensive analysis of the impact of bankruptcy on co-signers, ensuring those considering bankruptcy are well-informed about the consequences for their co-signers.

Bankruptcy Basics

Before getting into the specifics of how bankruptcy affects co-signers, let’s briefly outline the two main types of personal bankruptcy: Chapter 7 and Chapter 13.

  • Chapter 7 Bankruptcy: Known as liquidation bankruptcy, it involves the sale of non-exempt assets to pay off debts. It can lead to the discharge of most unsecured debts.
  • Chapter 13 Bankruptcy: This is a reorganization bankruptcy, where you follow a court-approved repayment plan to pay back all or a portion of your debts over three to five years.

The Impact on Co-Signers

When you file for bankruptcy, the automatic stay immediately stops most creditors from pursuing debt collection against you. However, this protection does not extend fully to your co-signers. Here’s how it affects them:

Under Chapter 7 Bankruptcy

  • Immediate Liability: When you file for Chapter 7 bankruptcy, your responsibility for the debt may be discharged, but your co-signer becomes the primary focus for the creditor. The creditor can, and often will, pursue the co-signer for the full amount of the debt.
  • No Automatic Stay for Co-Signers: The automatic stay that protects you from creditors does not apply to co-signers in Chapter 7. Creditors can continue to pursue them for debt repayment.

Under Chapter 13 Bankruptcy

  • Co-Signer Stay: Chapter 13 offers more protection to co-signers. The “co-debtor stay” can protect co-signers as long as the repayment plan proposes to pay the co-signed debt in full and you comply with the plan.
  • Partial Protection: It’s important to note that this protection is not absolute. If the repayment plan does not cover the co-signed debt, or if the court lifts the co-debtor stay, creditors can pursue the co-signer.


Bankruptcy Attorney can Help Protect Co-Signers


Strategies to Protect Co-Signers

  • Consider Chapter 13: If protecting your co-signer is a priority, Chapter 13 bankruptcy often offers more safeguards. The co-debtor stay can shield your co-signers from creditors as long as you adhere to the repayment plan.
  • Discuss Your Situation: Inform your co-signers about your decision to file for bankruptcy. Open communication can help them prepare for potential consequences and explore their options.
  • Reaffirmation Agreements: In some cases, you might choose to reaffirm a co-signed debt. This means you agree to remain legally obligated to the debt despite the bankruptcy filing, thus protecting the co-signer.
  • Negotiate with Creditors: Co-signers can sometimes negotiate with creditors to modify loan terms, making payments more manageable, or even settle the debt for a lesser amount.

Legal Considerations

Consult with a Bankruptcy Attorney

  • Get Professional Advice: A qualified bankruptcy attorney can provide tailored advice based on your specific situation and guide you on the best course of action to protect your co-signers.

Understanding the Full Impact

  • Long-Term Effects: It’s crucial to understand the long-term effects of your bankruptcy on your co-signers’ credit and financial situation. Bankruptcy can significantly impact their credit scores and borrowing capabilities.


Filing for bankruptcy, whether under Chapter 7 or Chapter 13, can have profound implications for your co-signers. It’s a decision that requires careful consideration and a thorough understanding of its impact.

By choosing the right type of bankruptcy, maintaining open lines of communication with co-signers, and seeking professional advice, you can navigate this complex process with more confidence and awareness of its effects on those connected to your financial decisions.

Remember, bankruptcy is not just about discharging debts; it’s about managing the broader implications of those debts, especially when others are involved.

Learn More

At Blue Bee Bankruptcy, our lawyers are highly experienced in bankruptcy options. More importantly, we understand that each case we receive is unique and each client has different needs and goals. We will discuss these signs with you and decide the best route to take.

We strive to help our clients rebuild their lives and take steps toward a better financial future through filing. 


Best Bankruptcy Attorneys in Salt Lake City


If you’re dealing with the potential of bankruptcy, give us a call. Our team will work to help you by reviewing all of the options our firm has available. We will ensure you’ll get the best possible outcome for your situation.

Get in touch today so we can start working on either halting bankruptcies or preventing them from taking place altogether!

Contact Us Today For Help! You can schedule your free consultation online or call us at (801) 285-0980.


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