Cosigning For Debt and Bankruptcy

Cosigning and Bankruptcy

Cosigning For Debt and Bankruptcy helps get you off the hook for the debt once you file your chapter 7. If you or someone you co-sign for on a vehicle is considering bankruptcy, you likely have questions.  What happens to the consignor under bankruptcy?  Does the car become eligible for repossession?  This article will answer some of the most common questions about Cosigning For Debt and Bankruptcy in Oklahoma.

Cosigning and Bankruptcy

Let’s imagine you are a parent co-signing on a car for your child.  In this situation the vehicle may go to the trustee.  It all depends on who the title lists as the owner.  If the person filing bankruptcy is the owner on the title, then they must list it in the bankruptcy and either continue making payments or send it back.  If the co-signer however, is not the person filing and they are not on the title, then their interest in the vehicle does not technically exist.  In this case the person who you cosigned for can keep the car so long as they keep making their payments. In summary, if a cosigner is filing bankruptcy, but have their name on the title of a car they cosign for, then the car must be listed as an asset and will be subject to bankruptcy laws, otherwise the person you co-signed for can keep the car without any problems.

Read This Article Regarding Garnishments and Bankruptcy 

Paid Off vs. Still Paying

Cosigning For Debt and Bankruptcy depends on certain conditions. Things change however, if the car is paid off.  When a vehicle no longer requires payments, it may fall under the vehicle exemption even though it is an asset.  So, in cosigning for debt and bankruptcy, if the vehicle is paid off and falls under the exemption, then the cosigner will not face repossession or other legal repercussions.  But, in some cases you may still be making payments on the vehicle.  If the car is worth more than the amount the cosigner and owner owe, then you may also use the exemption.  However, if the car is worth less than the amount you owe, then trustees usually overlook the vehicle altogether.

Who Makes Payments?

Finally, it does matter how makes the payments on the vehicle.  If the cosigner that is filing bankruptcy is making the primary payments, then theyCosigning For Debt and Bankruptcy must show this in their bankruptcy.  This will determine if a reaffirmation is the right course of action for cosigning and bankruptcy.  This means that the debtor can keep the vehicle because they have the money to continue making payments on the vehicle after the bankruptcy is complete.  However, if the person primarily making the payments is not the debtor, then the law considers the payments a separate source of “income” for the debtor.

Further, if a cosigner can afford to make the payments even though the owner is filing bankruptcy, then the car can reaffirm.  However, the co-signer will then list as a co-debtor in the bankruptcy.  But if the cosigner cannot make the payments and wants to be entirely off the loan, the owner may still keep the vehicle.  This means that the car will not be part of the bankruptcy.  Thus, you will be subject to the policies of the lender regarding the car.  This is not always advisable.  We strongly advise you to speak with a bankruptcy attorney.  Our Phone consultations are free and we only require $400 down to begin your bankruptcy.

Tulsa's Local Bankruptcy Lawyers

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