If someone you cosigned a loan or line of credit with decides to file for bankruptcy, will your own credit score be affected? This is a valid concern for anyone who has cosigned a line of credit for someone who later could not afford to make payments on the debt. Continue reading to learn more about how a borrower’s bankruptcy could potentially affect your credit and how a Florida bankruptcy lawyer may be able to assist you.
No, a Cosigner Won’t Also Have a Bankruptcy
When a borrower files for bankruptcy, this does not transfer over to the cosigner. No bankruptcy reports will be made to credit bureaus on behalf of the cosigner and only the borrower will have a record of bankruptcy on their credit report. This is a relief for many cosigners, however, you’re not necessarily out of the woods yet.
Balance and Payment History
While a borrower’s bankruptcy itself won’t show up on a cosigner’s credit report, late payments or a history of non-payment will. So if the borrower misses a string of payments leading up to their bankruptcy filing, this will most certainly be reported to your credit.
On the other hand, if a borrower files a Chapter 7 bankruptcy and the debt is discharged, it will show on your credit report as a closed account. On-time or late payments prior to the closure of the account will still be on your record. If the borrower files a Chapter 13 bankruptcy and makes on-time payments during their 3-5 year repayment period, this can benefit the cosigner.
One of the most important things you can do as a cosigner is to communicate with a borrower who is struggling to make payments. You may even have to make a few payments for them to ensure that a late or missed payment isn’t reported to your credit history. Talking about what the borrower can manage and what the next best steps might be can help protect your credit in the event the borrower can’t pay.
How a Florida Bankruptcy Lawyer Can Help You
If you cosigned a credit card or loan for someone who is now declaring bankruptcy, it’s absolutely crucial to go over your circumstances with a bankruptcy lawyer to learn how to best protect your own finances. Reach out to the experienced Florida bankruptcy attorneys at Caplan Bankruptcy for a consultation by calling 407-872-6249.