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Co-signer Obligations After Bankruptcy

Discuss the legalities of Bankruptcy Law

Co-signer Obligations After Bankruptcy

Postby Sceapleigh » Thu May 15, 2014 10:23 pm

My husband co-signed on a 4 wheeler for his son. His son as since filed bankruptcy and his debts have been discharged. The legal firm handling this debt sent us a letter stating we are under no obligation to repay this debt. The company is out of Arizona and we live in Virginia. Is this true or will this come back and bite us later?
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Joined: Sun Mar 09, 2014 8:54 am

Co-signer Obligations After Bankruptcy

Postby Kaylan » Fri May 23, 2014 6:46 pm

You may be stuck but it's an open question right now.  If the law firm handling the debt as you say is the outfit that filed bankruptcy for the son, then they're wrong because secured creditors ride through bankruptcy on cars, generally speaking. If that's who you're talking to, ask them to explain how it is you're not liable.

If this was the law firm for the creditor on the other hand, while I'm surprised they'd say that, if they say that you don't have to pay then you probably don't have to.

The law is, however, that co-signers have to pay what the principal doesn't.  

That said, I'd wait and see what happens, if anything.  Most likely the debt will get sold to a collection agency that will hound you for a while then give up.  However, a deal can be made with them because they buy the debt for a fraction(5-10%) of face value, so if you agreed to pay 20% to fully satisfy or threaten bankruptcy yourself they'd probably take it.  I'd play hardball with whomever calls you demanding payment.  Also find out what happened to the vehicle;  it could be it was repo'd and sold for what was owed(unlikely) but you can always question the amount received at the repo sale and if it was not commercially reasonable, then you can argue you're not responsible if they don't make a best efforts attempt to get the top dollar.

Good luck!  

Lee Horner

Goldstein, Horner & Horner, Attorneys

Tucson, AZ
Posts: 44
Joined: Sun Feb 02, 2014 11:37 pm

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