If I File Chapter 13 Bankruptcy Will My Son be Protected?

Question:

Dear Steve,

I am the cosigner on my sons private student loans. I have been paying them because he is nowhere near able to pay the large amount. All was well until I had incurred very large credit card debt. I am thinking about filing a Chapter 13 bankruptcy. Will the automatic stay keep the lender from going to him for payment. There is no way he can pay and would probably have to file bankruptcy also. I will gladly reaffirm the loans after the Chapter 13 is ended. I do not want a discharge.

Nancy

Answer:

Dear Nancy,

Obviously I am not a lawyer and can’t provide you with legal advice. You should discuss this with your attorney. However, I can offer some general feedback.

It is my understanding that the chapter 13 will protect you and would protect your son from collections, UNLESS, the creditor obtained court permission to life the codebtor protection. This can happen if the cosigner or joint account holder received the consideration or primary benefit from the creditor’s loan or your Chapter 13 repayment plan does not propose to pay the cosigned debt.

Why not just file a chapter 7 bankruptcy and get back to paying the student loan?

One big problem with cosigner bankruptcy is it can accelerate the loan for the student. Again, all of these issues should be discussed with your bankruptcy attorney.

Sincerly,


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Steve Rhode

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