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What happens to a cosigner when I file bankruptcy in NJ?

Was one of your debts (most often something like a car loan) co-signed by a friend or family member. What can happen if you file bankruptcy? Well, that can depend on what type of bankruptcy you file.

If you file a chapter 7, then your cosignor is still responsible for all of it, and the creditor can go after him/her to collect. The solution may well be to continue making voluntary payments on thee debt after the bankruptcy is over to keep them from going after the other person.

If you file a chapter 13, then something called a "co-debtor stay" can come in to protect the co-signer, but only to the extent that your plan repays the debt. So if your plan pays the creditor 100%, then the co-debtor cannot be touched. However, if you are paying less than 100%, or nothing, the creditor can go after the co-debtor for the unpaid portion.

So as you can see, you have to tread carefully in your bankruptcy if you wish to protect the co-signer. This means ongoing payment of the debt in a chapter 7 or careful drafting of your repayment plan in a chapter 13.

If you live in South Jersey and are considering filing bankruptcy, call my office at 856-432-4113 or contact me through this site for a free consultation to discuss your case. If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

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