Co-signer protected in chapter 13?

[RNmomtofour]

hi,

I was thinking of filing bankruptcy alone since my hubby's car loan was done with his father as cosigner and we wanted to protect him. I just read that during a chapter 13, they are protected? Is that true? Do they even have to know that we are doing a chapter 13? He is not a nice man and would make our lives hell if it all damaged his credit etc.
Thanks.

[HHM]

Why does it matter...if "you" are filing BK, and the car loan is between your husband and his father, that debt wouldn't even enter into your BK? (note, the expense would insofar as it is a household expense, but as the one filing BK, if you are not liable for the debt, then the car lender would not be listed as a creditor.

Maybe we need to back up and get a little more info.

What is the plan with the car, are you current on payments, are you planning on keeping it?

[RNmomtofour]

Sorry - maybe I was unclear. I would like us BOTH to file if the cosigner is protected. The only reason "I" was going to file alone was because of this issue. We are one payment behind and yes, we have to keep it.

[HHM]

okay.

Yes, there is a "codebtor stay" for consumer debts. So, if husband files chapter 13 BK, the car lender cannot go after the cosigner. HOWEVER, that doesn't necessarily mean the cosigner won't find out.

[ess]

I'm not sure about a Chapter 13 since I filed Chapter 7 but I filed alone and my husband is listed as the co-owner on our car. The BK court did send a BK notice to my husband as the car had to be listed as a debt on my petition. I would assume it works the same way in a Chapter 13 if both you an your husband file together.

[RNmomtofour]

Just got off the phone with lawyer for my consult

I am so confused now! She said that we can keep paying on my husband's car loan with my father in law as the cosigner and he will not be affected by the chapter 7 bankruptcy. How is that possible? Everything I have read said they are protected in 13, but not 7. We would totally file chapter 7 if it weren't for this bump in the road. We cannot have my father in law affected in any way. I have another face to face meeting with her on Saturday. She was really pushing for 7 instead of 13. We make a total of 98k/year for a family of 6. She said that is within the median income limits for 7. We have 60k in cc debt. I am so afraid she is going to tell us that he won't be affected and then he will be liable. That would rip apart our already delicate family dynamic.

[buffetbuster]

We had the same concern about our mortgage. My in-laws co-signed for our mortgage and we were very concerned that they would be affected, but it didn't happen. We didn't include the mortgage in our BK and not only didn't her parents get affected by our BK, but they didn't even know. They still don't know. If you don't include the car in the BK, then I'm pretty sure that your father in law won't be affected.

[AngelinaCat]

We had the same concern about our mortgage. My in-laws co-signed for our mortgage and we were very concerned that they would be affected, but it didn't happen. We didn't include the mortgage in our BK and not only didn't her parents get affected by our BK, but they didn't even know. They still don't know. If you don't include the car in the BK, then I'm pretty sure that your father in law won't be affected.

You have to include ALL of your debts--that is the problem. If the OP and her DH file a Ch13, they can set the car outside the Ch13 plan. At least that is the way that I understand it from reading the many posts here. However, I just now read that the folks would prefer to file a Ch7. If they don't disclose this car payment, and attempt to pay it outside the BK, they run the risk of having their case dismissed. Our attorney, as bad as she was, DID warn us very strongly about trying to do anything such as this.

RNmomtofour, please, PLEASE schedule at least three more free consults, before you decide on any attorney.

[AngelinaCat]

I have merged these two threads together as the subject matter is the same--namely, how to protect a co-signing FIL on a car note, and keep from finding out about the impending BK of son and DIL, and having his credit score damaged--should they decide to file.

Good wishes to both the OP and her hubby in this!

[LadyInTheRed]

You have to include ALL of your debts--that is the problem. If the OP and her DH file a Ch13, they can set the car outside the Ch13 plan. At least that is the way that I understand it from reading the many posts here.

All debts are listed in a Chap 13 petition and all debts are part of a Chap 13 plan. This is a common area of confusion because we so often talk about paying secured debts "outside of the plan" which really isn't a very accurate way to put it. It is more accurate to say that a debt is being paid directly by the debtor to the creditor instead of being paid by the trustee from the plan payment.

As long as you keep making the car payments, it should not affect the FIL in a Chap 7 or Chap 13. But, it is possible he will receive notice of the BK.

[AngelinaCat]

All debts are listed in a Chap 13 petition and all debts are part of a Chap 13 plan. This is a common area of confusion because we so often talk about paying secured debts "outside of the plan" which really isn't a very accurate way to put it. It is more accurate to say that a debt is being paid directly by the debtor to the creditor instead of being paid by the trustee from the plan payment.

As long as you keep making the car payments, it should not affect the FIL in a Chap 7 or Chap 13. But, it is possible he will receive notice of the BK.

Thank you Lady, for that clarification. I agree that the way it is talked about here can be confusing.

No matter which BK Chapter the OPs decide to file, I think the co-signing FIL is going to find out about it sooner or later, and not be happy..... which is what they are trying to avoid.... *sigh*

[SMinGA2]

One note: if you're behind on the car loan now (assuming you mean 30+ days) then the father in law's credit is already affected.

[RNmomtofour]

We are not behind on the car loan. We just do not want his credit affected at all.

[Tater]

Just for my own clarification, if they are able to do a Chapter 7, how would this affect the FIL's credit report since he is a co-signer? Or would it at all since he would not be on the bk petition? Also, if they need to reaffirm the car loan, would the FIL also have to sign the agreement? I hope I am not making this more complicated but I was just curious.

[HHM]

His credit will NOT be affected.

Granted, sometimes mistakes are made.

You're asking for an absolute guarantee, but none exists. There is what is supposed to happen, and there is what sometimes (rarely) happens. Short of not filing BK, there is no way to prevent the "rare" event that is not supposed to happen.

If you are current on payments and file chapter 7, there is no need for husband's father to find out. The court doesn't notify him and there is no "reason" the lender would. You just keep making payments (you may need to reaffirm the debt), and from husband's father's perspective, it is as if nothing happened. Is it possible the lender can make an error and report the BK on father's credit report, yes. Is that a very fixable situation, yes. But if your goal is to prevent him from ever finding out, there is no guarantee.

In the end, you have to do what is in your best interest. You can only control what you can control. Stop worrying about what you cannot control.