What Happens to the Co-Signer of a Car Loan in Bankruptcy?
When considering bankruptcy, many people want to know: What happens to the co-signer of a car loan in bankruptcy? Co-signers are sometimes used by borrowers when their credit score is too low to qualify for a loan on their own. The co-signer takes on responsibility for the debt if the borrower defaults and can be targeted by creditors during bankruptcy proceedings.
If you’re a co-signer on an auto loan, it’s important to understand what happens to that debt in a bankruptcy situation. If the primary borrower files for Chapter 7 or 13 bankruptcy, then the lender may attempt to collect from both parties even though only one filed. This can mean garnishing wages or income tax refunds for both parties.
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