What Occurs If Your Debt Is Co-Owned or Co-Signed by another Individual?

Interviewer: If I own a property, say with a sibling or my vehicle's been co-signed by someone else, how does that work when you're having to list out in the bankruptcy paperwork everything that you own, everything that you make payments on, if someone else's name is also on it? How is that going to affect your bankruptcy filing?

You Can List the Asset in Your Bankruptcy and Continue to Make Payments If You Want to Retain the Co-Ownership

Vance: Assuming that you want to keep the asset that you have a cosigner on, you can list that in a bankruptcy and you can keep making the payments. It will not affect the other party's credit report at all because their Social Security number's not associated with the bankruptcy, only your Social Security number is associated with it.

If You Want to Surrender Ownership in the Asset, the Co-Owner or Co-Signer Would Be Responsible for Payment

Now that changes if you come in and want to surrender your interest in that asset. If you file bankruptcy and you surrender the asset, say you have a car that your dad co-signed for you and hopefully - this doesn't happen but it does happen sometimes - if you can't afford the car anymore and surrender it, you won't be liable for the deficiency when it's taken and sold at auction - but your dad would be.

If your co-signer doesn't step up and start making the payments themselves and they let the car be repossessed, the repossession will then appear in the credit report.

Interviewer: On their credit report as well?

Vance: As long as you want to keep the asset and keep paying on it, it will not affect their credit.