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What Happens When Your Student Loan Cosigner Files for Bankruptcy?

With rising tuition prices across the nation, it’s not surprising that there is so much talk about bankruptcy and student loans, excessive student loan debts, and astronomical student loan payments. What many are wondering, but not many are sure about is what happens when the cosigner on a student loan declares bankruptcy. This is one of many questions we often advise clients on regarding bankruptcy and cosigners.

Does a Cosigner Need to List the Student Loan in their List of Creditors?

Yes, if an individual is filing for bankruptcy and they are a cosigner on a student loan, they should include it in their list of creditors. Even if the debt is not eligible for discharge or expected to be discharged, it should be included when filing for bankruptcy.

Will the “Student’s” Credit Be Affected by the Cosigner’s Bankruptcy?

No. If you have consistently been making your student loan monthly payments and continue to do so, the cosigner of your student loan filing for bankruptcy should have no affect on your (the student’s) credit report.

Does the “Student” Need to Continue Making Payments?

As stated above, yes. Please don’t assume that you should stop making payments on your student loan simply because your cosigner is filing for bankruptcy. Doing so would result in negative reports to the credit reporting agencies regarding late payments.

Will the Student Loan Balance Be Discharged if he Cosigner Files for Bankruptcy?

Student loans typically survive bankruptcy. When the bankruptcy is over, it could be possible (depending on what type of bankruptcy your cosigner filed) that payments will be made to the bankruptcy trustee in the case who will then divide the payment up amongst the creditors according to the determined schedule. It’s possible that the student loan could be included and, therefore, may receive a partial payment from the bankruptcy trustee. In this case, the payment coming from the cosigner’s bankruptcy trustee would be in addition to the monthly payments that you (the student) were already sending.

That means that, generally speaking, it will not hurt your credit for your cosigner of your student loan/s to declare bankruptcy and it could even potentially benefit you by aiding you in getting your debt paid off faster. If you have additional questions about Southern California’s bankruptcy laws and how they relate to student loan debt, contact the bankruptcy attorneys at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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