How will my filing bankruptcy affect my cosigner?

Transcript:

Hello, this is Jeff Kelly. Today is January the 29th 2021. And in today’s podcast, I want to answer the question, how will filing bankruptcy affect your cosigner? The short answer is you filing bankruptcy will damage your co signers credit, how much damage? The answer is, you’re not going to know until after you file.

Most bankruptcy attorneys are not going to answer this question for you. I recently engaged in a Facebook conversation on this topic with fellow consumer bankruptcy attorneys from all parts of the United States and I received some really good feedback. And I really appreciate the very open and honest answers I got from a lot of people. And, you know, one attorney explained that they just avoided this topic altogether with their clients by asking by stating that, hey, look, I only represent you and I don’t represent your cosigner, I’m not going to talk about it. And the reason they do that is they’re trying to basically avoid the subject. Because a lot of people if they knew the truth, that it was going to hurt their cosigner, they, they either might not file bankruptcy at that time, or might try to work something out.

Now, personally, I believe honesty is the best policy. When a client comes in and meets with me or one of my associates, we are upfront we tell the truth. It is a core value of this law firm. And I believe it’s something that really separates us from a lot of others if you don’t need to file bankruptcy.

Number one, we’re going to tell you that and then we’re going to go into some detail with you to explain why you don’t need to file I think it’s much better to be honest and open about the truth, you’re going to get much happier people you have a much happier life. And I’ve got the Google reviews to back it up, check it out. So uh, you know, another attorney said that he would, you know, point to a car out in his parking lot. And so Oh, wow, look at that car. And basically just, you know, again, try to avoid it. And I just, I just think it’s a terrible, terrible idea to sweep this issue under the rug before you file because in most consumer bankruptcy cases, the cosigner is almost always a relative, or a super close friend. Can you imagine how upset a cosigner relative friend is going to be when they go to buy a new car, and they get the big denial? Because their credit score was unexpectedly lowered? And then they figure out it was because you filed a chapter 13 and didn’t tell them anything about it? Yeah, this kind of surprised always ends with someone getting upset, and it could severely damage a close relationship. Personally, I think it’s much much much better to warn the cosigner before the case is filed. So is there anything that a cosigner can do to avoid the damage to their credit score?

Well, you know, the answer is yes, but it’s probably not gonna happen. Number one is pay off the debt, the cosigner can pay off the debt before the bankruptcy case gets filed, they won’t get damaged. Well, a lot of times people don’t have cash for that kind of thing. The other thing they maybe they could do the cosigner could refinance the entire debt in their name 100% their name only. And you know, again, this is unlikely because most creditors love having their claws into two people and not just one. So are you required to tell your cosigner about the bankruptcy? Well Technically Yes, the bankruptcy code requires you to list the name and address of the cosigner in the petition. The cosigner will get a notice of the bankruptcy filing. 20 years ago, I still remember this guy from Gainesville, Georgia who was quite a character. And he told me that he was not going to tell his girlfriend ahead of time, and we just wait until later. He’s gonna sweep it under the rug and I told him bad idea. Well, we had a list or we had to list her address and so you know, of course, eventually she finds out and we did have to file his case pretty quickly because we were trying to stop a repossession. So, what happened? Well, as you can imagine, the girlfriend went ape, absolutely nuts, angry, furious. And, you know, he ended up back in my office crying, crying his eyes out, please. You got to fix it. You got to fix it. Once the damage is there. I mean There’s no undoing it. There was nothing we could do. I’m not sure how it worked out with that guy long term with his girlfriend, his case worked out well. But bottom line is, whoever came out that phrase that forgiveness is easier than permission should be violently slapped.

Because it’s not true. Yeah, it you know, it’s not true. It’s just be honest, just be open. In a chapter 13 bankruptcy case, we can use the cosigner protection provision to protect a cosigner from harassment and from lawsuits when we pay the cosign debt at 100 cents on the dollar along with applicable interest. Now, a lot of people get really confused because they hear cosigner protection provision, and they think that that’s going to protect the Cosigners credit rating and it is not. Again, how much damage is it going to do the cosigner after a file? We really don’t know. It varies, it depends. We don’t really know. So to the cosign of the of the world people who cosign and get really upset about this kind of thing I would like to speak to you. Number one, please don’t end a friendship or ruin a family relationship because you made the decision to cosign on a loan.

Number two, if the debt gets fully paid in a chapter 13 case, consider yourself lucky that the only damage is is to your credit score. No one made your cosign You didn’t have to do it. But you did. Life happens 99% of the bankruptcy cases that get filed are because something happened that was out of that person’s control. COVID-19 is not their fault. Millions of people have lost their jobs because of it. When a spouse leaves someone with a big pile of debts and a bunch of kids to raise it’s not their fault. When they get cancer and run up huge amounts of medical bills. It’s not their fault. Life happens. Be merciful. James chapter 2 verse 13, states judgment will be merciless to the one who has shown no mercy. Mercy triumphs over judgment. Cobra Kai people are going to be in big trouble on Judgement Day. If you haven’t watched Cobra Kai on Netflix. It’s pretty good show. I love it. I was big fan of The Karate Kid when I was younger.

Lastly, just don’t cosign for anybody in your life ever, ever, ever. It’s always a bad idea. When the car dealer says Well, we could sell you the car. But you know, if you don’t cosign we just can’t do the deal. Just run. I mean, just just run fast. And you know, again, if if you have questions about bankruptcy, if you know somebody who’s facing foreclosure, car repossessions, garnishments, anything like that, tell him to call us, we are going to be 100% honest.

I do believe in God. And I believe someday I’m going to have to stand before him and give an account for things I’ve done in my past. And I’m not going to have to give an account for not telling the clients the truth about the cosigner protection provision. We tell the truth, honesty is a big deal to me. I believe in God, I believe we’re going to have to answer to him. I’ve already got stuff I got an answer for I’m not going to add to it. Check out my please check out our reviews. If you get a chance. I’ve got blog post at Kellycanhelp.com. And, you know we’ve also got a free book there I’ve written on chapter 13 and chapter 7. If you’ll call my office, we will send you a hardcopy while supplies last. And we’ll always be able to send you a digital version to your email. We work some evenings we work some weekends, we try to accommodate our clients as best we can. Right now, everything in bankruptcy can be done virtually you can actually file without ever leaving your house. You can actually go to court without ever leaving your house. Everything is done virtually right now because of COVID. I don’t see that changing anytime soon. I’m sure it will eventually. But again, give us a call 7708818449 Thank you for tuning in. And we really appreciate you thank you so much.