Bankruptcy Reforms and Co-signers

To learn more about how being a co-signer can impact your bankruptcy rights, call one of our Savannah bankruptcy attorneys today.

The new Bankruptcy Legislation Amendment which concerned anti-avoidance and other measures was introduced on 14th May 2004. The bill aimed at discouraging high income earners using bankruptcy as a means of avoiding paying tax. In spite of the small number of affluent people who resort to such means, the amount of money as tax from their share is significant. The irony of their situation is such that they are financially well off and hence can afford to pay legitimate tax but use unfair means like filing for bankruptcy etc, to evade their tax obligations.

The downside of this bill is that even though it is aimed at affluent people who can afford their taxes, it might adversely affect genuine people with serious financial problems who actually need advantages provided by filing for bankruptcy. This bill has been in effect since 17th October 2005.

The bill makes it more difficult for people who have filed for divorce to start afresh. Since the law has come into effect, chapter 7 bankruptcy filing has become considerably difficult. A means test has been introduced for evaluating eligibility for chapter 7 bankruptcies. You need to attend debt counseling as well as pay for it and this is considered as criterion for qualifying for bankruptcy filing. Those who do not qualify for chapter 7 can file for chapter 13.

Prior to filing for bankruptcy you need to consult a bankruptcy attorney to determine the type which is most appropriate for your situation. You need to get consent from your co signer as well since your co signer is responsible for making your payments depending on type of bankruptcy filed for.

A cosigner is protected only in a chapter 14 bankruptcy. In chapter 7 bankruptcy, debtor is protected but co signer is held responsible for the outstanding payments. Chapter 13 bankruptcy provides the co signer with a stay while the bankruptcy plan is active. When the bankruptcy plan comes to a close, co signer once again becomes liable for outstanding payments.

There are certain factors that have to be constant during a bankruptcy filing, failure of which co signer would be held responsible. These are:

• File for chapter 13 bankruptcy.
• Debt of co signer is a consumer or personal debt and not a business one, in case of chapter 7 bankruptcies.
• Co signer does not receive any benefits from debt proceeds.
• Bankruptcy plan payments are paid accordingly and promptly.

These are legal conditions and hence have to be approached with the seriousness it deserves. Your co signer could be in a lot of financial trouble if you default on your bankruptcy plan payments. Contacting a bankruptcy attorney is highly recommended under the circumstances.

Contact a skilled Savannah bankruptcy attorney if you need debt relief assistance or want to file bankruptcy.