It is quite common for bankruptcy clients to have friends, family members, or significant others as co-signers due to their inability to obtain credit without co-signer.
Our clients are oftentimes concerned about how their decision to file for bankruptcy might affect their co-signer’s credit. If you have a credit card with a co-signer, you can still get that debt discharged by filing for bankruptcy. However, your co-signer would still be responsible for paying the balance if you do not pay it or if that debt is discharged.
If you have a co-signer on your motor vehicle, you could sign a reaffirmation agreement and continue to make the payment. Those payments would be positively reported to the credit bureaus. Then your co-signer would not be affected by your bankruptcy filing.
If you are in a Chapter 13, the automatic stay would protect your co-signer from any collection efforts by the creditor while you are in the Chapter 13 plan. However, if the creditor is ultimately not paid in full then the creditor could try to obtain the balance from the co-debtor. As long as the co-debtor or you are current on the payment, filing for bankruptcy should not adversely affect their credit.
Generally, if spouses are co-debtors and have a lot of joint debt it is more practical for both to file for bankruptcy so one spouse is not stuck with the debt. A co-debtor being on a loan or credit line raises a lot of concerns and questions on the impact a bankruptcy filing will have.
If you have any questions about how filing your bankruptcy could potentially affect a co-debtor, feel free to contact me at (813) 463-8000.
People often ask how to rebuild their credit after filing bankruptcy or how bankruptcy will affect their credit. I am often asked if filing for bankruptcy will destroy credit for 10 years. Most clients are surprised at how quickly their credit rebounds after filing their cases. The ability to get a credit card or loan after filing is relatively easy to do. Of course, we don’t recommend incurring debt during or immediately after filing but getting a credit card is typically achievable. By getting a small secured credit line at your bank where you are putting in a collateral of cash in a deposit account can rebuild your credit. Additionally, becoming an authorized user on someone else’s credit card will also help build good credit history.
Making other payments such as your car payment on time will help rebuild your credit. While it’s not unheard of to get a car loan upon filing for bankruptcy, most car lenders will require a discharge which happens 90 days after filing your case in order to get a car loan. Bankruptcy allows you to surrender a car that is underwater without having to pay anything to the lender. This allows people to buy a car outright or get new financing and a lower car payment without having to trade in a car with negative equity.
Regarding home loans, there are different types of home mortgages that you could be eligible for. In order to qualify for a conventional mortgage, it can take anywhere from 2 years to 4 years from the date of your discharge. To qualify for an FHA or VA loan, it may take as little as 1 year and up to 2 years from your date of discharge. I recommend once some time has passed after you receive your discharge to contact a licensed mortgage broker to see what type of loan you might be able to qualify for.
Should you have any questions, feel free to contact my office at (813) 463-8000 and we would be happy to answer any of your questions or concerns.
If you have a debt that has been “charged off” this means that your original creditor has written your debt off their books. However, this DOES NOT mean that you are not responsible for the payment of the debt. Creditors often sell individual debts to third party collection companies whose business is debt collection. The collection company will first contact you in an attempt to collect the debt and if unsuccessful will take further actions such as filing a lawsuit and obtaining a judgment. After a judgment is entered, the creditor has the power to garnish wages, seize assets, or assert a lien against your property.
If you are uncertain whether or not an “old debt” is still valid, you should pull a credit report to obtain the date of your last payment to each creditor to determine whether the time has expired for the creditor to collect against the debt. If you are dealing with a creditor pursuing a debt that has been “charged off” or old debt and want to evaluate whether or not the debt is valid feel free to contact me to discuss your options.
During the height of the market, many people purchased investment properties that they could no longer afford. As a consequence, if the mortgage is not paid, the lender will initiate foreclosure proceedings. There are options available that will allow you to keep both your homestead and your investment property and save money in the process. For example, if your investment property in underwater, you are delinquent on the mortgage and you owe the lender $150,000 but the appraised/fair market value of the property $80,000 you can “cram down” the mortgage payment and pay the lender back $80,000 + 5.25% interest over a 5 year period, keep the property and potentially wipe out the $70,000 to the lender.
Whether you are married or separated, you can still file for bankruptcy on your own. There is no requirement that your spouse file for bankruptcy.
Chapter 7 or Chapter 13 Bankruptcy?
If you are married and maintaining the same household, then the trustee will consider your joint income to determine if you are over the median income qualifications for a Chapter 7 bankruptcy or to determine what you are financially able to repay in a Chapter 13 bankruptcy.
If you are separated and maintaining separate households, you expenses should also be listed separately.
Contact Gina Rosato Law Firm, P.A. to discuss your Bankruptcy Options
Your divorce decree is a contract between you and your ex-spouse. This is completely separate from any contractual obligations you have with your mortgage lender or your credit card company.
Therefore, if you have a joint debt, even though your divorce decree says your ex-spouse will assume all the debt, your creditors can still come after you for the debt. For example, suppose you and your ex-spouse had a joint credit card with Bank of America for $20,000. During your divorce, your spouse assumes payment of the $20,000 debt. Your ex-spouse does not make a payment on this debt or files for bankruptcy. Bank of America can come after you for the $20,000 debt. If this happens you would need to pay it or file for bankruptcy. If you end up having to pay a anything to Bank of America you would have a cause of action against your ex-spouse once you have re-paid the creditor. If you and your spouse have significant amount of joint debt, it maybe beneficial to consider bankruptcy prior to filing for divorce to resolve these issues that may cost you more down the road in payments to creditors and additional attorney fees.
Contact Gina Rosato Law Firm to discuss your Bankruptcy Options