I Co-Signed An Account–What Happens If I File Bankruptcy?

18 Mar I Co-Signed An Account–What Happens If I File Bankruptcy?

People who co-signed an account and have to file bankruptcy are understandably concerned whether their bankruptcy filing will be reported on the other person’s credit report.  The answer to this question is that it won’t.

Many times when someone talks with a bankruptcy lawyer, he or she is concerned that an account that was co-signed will affect that other person’s credit.  Typically, it involves spouses where the debt is in the name of one spouse and the other spouse is not filing bankruptcy.  Another typical situation is where a parent co-signed for a car or credit card for an adult child and the adult child must file for bankruptcy.

As a general rule, a co-signer, also called a joint obligor, is fully liable on the debt and a credit reporting agency (CRA) may report any late payments or other information as long as it is accurate. However, with joint accounts, CRAs sometimes report that both obligors filed bankruptcy when only one obligor actually filed bankruptcy.  Sometimes, too, the credit report will state that the account is or was “included in bankruptcy” even though the affected party had nothing to do with the bankruptcy.

For the non-filing obligor, this can create a headache and can result in the denial of credit or other adverse actions based on the inaccurate credit report.  However, it can be a relatively easy fix if you are the non-filing obligor.

You should dispute the accuracy of the credit report (after all, you did not file bankruptcy) and request that the CRA  make the report truly accurate.  Additionally, you should dispute the information with the underlying creditor in that, once again, you did not file bankruptcy, so the creditor is furnishing inaccurate information to the reporting agency.  If the report is not corrected, then you may have legal rights under the Fair Credit Reporting Act (FCRA).

The bankruptcy filing of one obligor should not be included on the credit report of the other.  However, if the co-signed account was delinquent or was not paid in a timely fashion prior to filing bankruptcy, that information will be appropriately reported.

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Adrian Lapas, Esq.

I've been practicing bankruptcy law in North Carolina since 1993, and am certified as a specialist in consumer bankruptcy law by the North Carolina State Bar.
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