co-signer bankruptcy

What happens to a co-signer of a loan agreement if I file for bankruptcy?

A Quora user asks: What happens to a co-signer of a loan agreement if I file for bankruptcy?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:

You need to read what the loan agreement actually says.

Having said that, what these agreements usually say us that all signatories to the loan agreement are joint and severally liable. So if one person cannot pay (like yourself), then the other party is responsible for the entire loan.

Now, what recourse does the co-signer have against you if you file for personal bankruptcy?

If the co-signer pays off the debt, she can file a claim in your bankruptcy proceedings since now she is now one of your creditors. More particularly, she has the same rights as the other creditors, namely:

  • She can request that you be examined under oath before a bankruptcy court if there are issues regarding your personal conduct prior to and during your bankruptcy.
  • She can request a meeting of creditors which your Licensed Insolvency Trustee would be required to schedule and which you would be required to attend. The purpose of the meeting is to review the state of your financial affairs and to provide an opportunity to the creditors to ask you questions.
  • She can oppose your discharge from bankruptcy by filing an opposition with your Licensed Insolvency Trustee. If this happens, you would not be eligible for an automatic discharge from bankruptcy and you would be required to attend bankruptcy court to apply for your discharge from bankruptcy (and hence your debts).