A prospective client came into our Birmingham, AL office to get more information about Bankruptcy. As we were reviewing her list of creditors, she noted that one of the creditors had a cosigner. A little more than a year prior, she cosigned a loan on a vehicle for her younger sister. The lender required a cosigner because the sister was a recent hire on her job and had not established a credit history due to her age. Within several months, her sister fell behind on payments and ultimately the car was repossessed.
Proverbs 11:15 instructs us, “There’s danger in putting up security for a stranger’s debt; it’s safer not to guarantee another’s debt.” Whether or not you are a believer and follower, this is excellent advice.
This woman’s intention was to help her sister but ended up drastically affecting her credit score and the lender was now demanding the remaining balance from her as a cosigner. I explained that Chapter 7 Bankruptcy could discharge or get rid of this debt and that a Chapter 13 would be a way for her to repay the debt along with her other debts at a more affordable monthly amount. Her final decision was to file a Chapter 13 due to the affordable payments and the tremendous amount of interest she was able to save. A Chapter 13 case can also be used to pay a cosigned debt back in such a way that it can protect the cosigner. Even though cosigning for another person, family or not, is almost never a good idea, there are options available to deal with these situations.
I would encourage you to set up an initial free consultation with one of our licensed attorneys to discuss those options. You have nothing to lose and much to gain, so call our office and tell our receptionist that you would like to set up a free consultation to meet with one of our attorneys.