My Fiancé Co-Signed on a Business Loan 5 Years Ago. The Company Filed Bankruptcy. – Liza

“Dear Steve,

My fiance co-signed on a business loan 5 years ago. The company filed bankruptcy, and the company owners (they used their home as collateral) filed bankruptcy as well, leaving my fiance with the full debt. 5 years ago we had the money to pay it ($350K). Due to the recession, drop in stock values and the loss of his $200K/yr job 2 years ago, we have depleted our personal finances and cannot pay this debt. We tried for a single payoff of $25K the bank refused asking for $50K – we haven’t’ got it to give. Our attorney finally told him to file chapter 7. We will survive and come back.

Here’s the problem – my fiance was divorced 7 years ago. One credit card, Discover, is in both his and his ex’s name. He agreed to pay it down in the divorce settlement. Discover will not remove a co-signor, not even for divorce w/o taking the card to $0. Now we have almost $6K left to pay off on this card, and can’t. Since he is filing chapter 7 due to his business debt, we can throw this card in as well as any other debt we have. We asked our attorney if we can negotiate w/ Discover and keep it out of the bankruptcy. He said yes, but no matter what it will hurt her credit b/c we have already been late once and if we negotiate a settlement with Discover they have to report it to the credit agencies.

So does this mean no matter what we do this goes on her credit report? Is it worth it to even negotiate a settlement? Discover has our address, not hers, so she won’t find out till she checks her credit report and it is bad. We don’t want to hurt her, but can’t seem to figure out how to fix this, even if we had the $ – which we don’t. Any suggestions?


Dear Liza,

In a listing of things I never want to hear, I’ve now had to add “My fiancé co-signed on a business loan 5 years ago.” It ranks right up there with, “Duck, here come the missile” or “It looks like the bullet went all the way through.”

Even if you settle the Discover account, that will appear on her credit as well and hurt it. The attorney is right.

It seems to make more logical sense to include the debt and discharge his liability for it with the other debts. There is nothing that prevents him from continuing to pay off the balance for his ex-wife after his bankruptcy.

If you are going to file bankruptcy I think it makes the most sense to use the event to truly get a fresh start and financial second chance. Use the moment to do better moving forward.

Sounds like you are working with a smart attorney who is giving you good advice.

Please post your responses and follow-up messages to me on this in the comments section below.


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Damon Day - Pro Debt Coach

Steve Rhode

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