Many bankruptcy filers come to me with unnecessary anxiety. They fear that they can’t list this creditor because last year they made a charge on the account. They’re nervous that they can’t list another creditor because they just opened the account a few months before when they were still gainfully employed. They panic because they voluntarily closed an account before they decided to file for bankruptcy. They often come to me with wide eyes, hoping they can still declare bankruptcy on “some” of their creditors – clear out “some” of their debt.
Sadly, the panic is completely unnecessary. If you find yourself with any of these fears – toss them out the window. You don’t get to pick and choose which creditors are listed in your bankruptcy filing. ALL of them are included. No matter what!
Even if you know they won’t be eliminated, you list them. Even if you are going to voluntarily reaffirm the loan, you list them. Even if you haven’t used the card in years and you voluntarily closed it ages ago….guess what? You list it. Student loans, delinquent income taxes, sanctions from the court, restitution….any debt that you’re not going to get eliminated by bankruptcy…are still included in the list! Even if the account has a zero balance and you’ve never used it so you don’t list it (which is alright in this VERY specific instance), the credit card company will still close the account.
Debts that are secured by collateral (jewelry loans, mortgages, vehicle loans, etc.) must all be listed regardless of whether you’ll be keeping them or not. It doesn’t matter if you borrowed $200 from your ex-boyfriend (who later moved out and took all your scarves for some reason) or $60,000 from your favorite uncle that no longer calls you his favorite nephew….all loans need to be included in the list of creditors.
For some, the “all inclusive” rule seems simple until they run into a loan with a co-signer. For instance, say you are filing for bankruptcy and you are the co-signer on a student loan for your son. What are the ramifications of your bankruptcy on the loan? Don’t tell me…your answer is to panic. You’re not alone. Don’t feel bad. But at the same time, stop panicking! You have got this. Here’s how it would go down.
You will file bankruptcy. Say you end up inside of a Chapter 13 repayment plan. Your son can simply continue paying on his student loan as he has in the past. The student loan will be listed in the list of creditors and the son would be listed as a co-signer on the account in question. The son will receive notification of the bankruptcy filing. He doesn’t have to take any action once he’s received it. It’s simply a notification of the filing and he’s required to receive it since he’s a co-signer. Regardless, your son will simply keep making his payment directly to the lender. The lender will continue to report the on-time monthly payments to the credit reporting agencies. In some instances, the Chapter 13 repayment plan will even result in the debt being paid off faster – it just depends how it is set up and whether or not the bankruptcy trustee distributes any of the monthly payment amount agreed on toward the student loan debt. It just depends on the specifics of the case and how the Chapter 13 is set up.
If you have questions regarding the impact of a bankruptcy filing on a co-signer or a specific type of loan, get in touch with one of the experienced southern California bankruptcy attorneys at Westgate Law.