If I filed Chapter 7 and reaffirmed on my vehicle, how will that affect the co-signer on my note?

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If I filed Chapter 7 and reaffirmed on my vehicle, how will that affect the co-signer on my note?

Asked on September 30, 2011 under Bankruptcy Law, Indiana

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

First of all, if you reaffirm your auto loan and then subsequently fail to make the payments after your bankruptcy is closed, your lender can repossess the vehicle. At such time you can be sued for the "deficiency" balance (the difference for what the car is sold for and what you still owe). 

Your co-signer will remain liable as well. The loan would be reported as it is currently, so it would have the same effect on their credit as it has now.  In some cases, however, when the loan balance is low you can keep the vehicle and continue to make payments without having to reaffirm.  Although if you do this, you will have to keep track of when the loan is paid off since you will no longer receive monthly statements from your lender. 


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