If you cosigned a loan, credit card, or line of credit for someone else and they declare bankruptcy, you may be worried that the bankruptcy will also show on your credit report. Here’s what you need to understand and how you can protect your credit with the help of a Texas bankruptcy lawyer.
No, a Borrower’s Bankruptcy Doesn’t Appear on a Cosigner’s Credit Report
Fortunately, cosigners won’t see an actual bankruptcy report on their credit. Their score won’t be impacted by the bankruptcy itself and there will be no record that the cosigner had anything to do with the borrower’s bankruptcy. Many cosigners are comforted by this information, however, that doesn’t mean you’re necessarily immune from all consequences created by a borrower you cosigned for having financial trouble.
Payment History Concerns
While you don’t have to worry about seeing an actual bankruptcy on your credit report if you’re a cosigner, the payment history is a concern. Late or unpaid payments will be reported to your credit if the borrower misses a payment or doesn’t pay on time.
Filing bankruptcy may be beneficial to you if the borrower has been having difficulty making payments; a discharged debt in a Chapter 7 bankruptcy appears on a cosigner’s credit as a closed account. Any previous late or missed payments continue to affect the cosigner’s credit, but the account can have no further impact.
If the borrower files a Chapter 13 bankruptcy and misses payments or makes late payments to the bankruptcy court, these missed or late payments will continue to show on your credit for that account. However, if the borrower pays on time, this will also appear on your credit report and may be of benefit to you.
Get Legal Help From a Veteran Texas Bankruptcy Lawyer Now
If you are a cosigner whose credit may be impacted by a borrower filing bankruptcy, it’s important that you obtain legal guidance so you can make informed decisions going forward. You should also take the time to communicate with the borrower and try to work out any issues with the debt before taking the step to declare bankruptcy.
Contact Sims Bankruptcy Law, PLLC today to schedule a consultation to discuss your financial needs and whether or not bankruptcy may be a viable solution for you. Call now at 469-751-7467 (Dallas-Fort Worth) or 254-304-7161 (Central Texas).