Risk for Cosigner When Bankruptcy is Filed

At one time or another, most people have been asked to cosign a loan. The request is made because the credit of the borrower prevents that borrower from getting credit on their own. When someone agrees to cosign a loan, they are doing more then just lending their credit. They are putting themselves at financial risk in the event the borrower does not pay. For example, if you cosign on a credit card and the borrower files a Chapter 7 bankruptcy and eliminates their own liability, the cosigner remains responsible for the entire debt. In certain circumstances, such as the cosigning of a car loan, if the borrower files bankruptcy but decides to keep vehicle and continue to pay, the cosigner is ok as long as payments are made. However, if payments are not made and the car is repossessed, you are liable for the deficiency. Before you cosign a debt for anyone, know the risks. 

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