Many people that are in financial trouble are very stressed emotionally. Making the decision to file Chapter 7 bankruptcy can still be difficult for the overwhelmed debtor. Getting advice from an experienced financial professional or a bankruptcy attorney can be critical to determine the best course of action. Once the decision has been made to proceed with filing Chapter 7 bankruptcy the individual usually experiences a huge sense of relief knowing that here is hope for a second chance for a stable financial future. However, what happens if the debtor has debts that are guaranteed by a co-signer?
Many lenders, whether car finance companies, mortgage lenders, credit card lenders, or any other kind of credit grantor, are in the business of calculating and managing risk. If an individual’s credit history has been poor for some time, the individual may be asked by the credit grantor to find a co-signer or guarantor.
A co-signer refers to another individual who is equally responsible financially with the other person for their debt. The co-signer has signed an agreement on the account or loan, which is referred to a “joint account”, and is therefore just as responsible for the debt. A guarantor refers to an individual who has agreed to take responsibility for payment on a debt in the event that the original debtor defaults on their financial obligation. A guarantor’s liability is considered a contingent liability meaning that the guarantor is only obligated to pay on the debt if the person has defaulted on their payments. The bottom line is, if the individual’s debts have been co-signed or guaranteed by another person, such as a friend or relative, then filing Chapter 7 bankruptcy could damage the friend or relatives credit. This is why it is imperative that the debtor seek financial advice from a bankruptcy attorney to discuss their circumstances and see what options are available. Many times the bankruptcy attorney can help the individual and their families avoid serious repercussions and/or minimize the financial consequences to all parties involved. In a nutshell, filing Chapter 7 bankruptcy can have many advantages for a financially overwhelmed individual, but they must weigh out all of their options carefully with the help of a professional.
Many lenders, whether car finance companies, mortgage lenders, credit card lenders, or any other kind of credit grantor, are in the business of calculating and managing risk. If an individual’s credit history has been poor for some time, the individual may be asked by the credit grantor to find a co-signer or guarantor.
A co-signer refers to another individual who is equally responsible financially with the other person for their debt. The co-signer has signed an agreement on the account or loan, which is referred to a “joint account”, and is therefore just as responsible for the debt. A guarantor refers to an individual who has agreed to take responsibility for payment on a debt in the event that the original debtor defaults on their financial obligation. A guarantor’s liability is considered a contingent liability meaning that the guarantor is only obligated to pay on the debt if the person has defaulted on their payments. The bottom line is, if the individual’s debts have been co-signed or guaranteed by another person, such as a friend or relative, then filing Chapter 7 bankruptcy could damage the friend or relatives credit. This is why it is imperative that the debtor seek financial advice from a bankruptcy attorney to discuss their circumstances and see what options are available. Many times the bankruptcy attorney can help the individual and their families avoid serious repercussions and/or minimize the financial consequences to all parties involved. In a nutshell, filing Chapter 7 bankruptcy can have many advantages for a financially overwhelmed individual, but they must weigh out all of their options carefully with the help of a professional.
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