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Nicolet Law managing attorney Russell Nicolet

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A Co-signer's Bankruptcy Can Impact Your Credit Score

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A Co-signer's Bankruptcy Can Impact Your Credit Score

A man disappointed with his low credit score

Often, those who co-sign for loans with other people — a parent who co-signs on a child's student loans, for instance— are told repeatedly about the risks. In that example, if the child does not pay the loan back, the parent still has to pay.

However, it's interesting to note that there are certain risks to the initial co-signer, as well, especially if the other party decides to file for bankruptcy.

For instance, a young woman got her father to co-sign with her on her student loans. She then started paying them back, as she was supposed to, but her father decided to file for bankruptcy. He did not tell her he was doing so.

Suddenly, her credit score started falling, there was a freeze on her account, and she couldn't pay each month. Her loan was sent to another company, which was trying to collect the loan in full.

What becomes important in cases like this is which type of bankruptcy was filed. If Chapter 13 is used, the above should not happen. Chapter 13 is designed not to harm co-signers, and it is also a type of bankruptcy based on a payment plan.

Chapter 7, though, could have this impact on co-signers, as it is a liquidation-style of bankruptcy, so lenders often scramble to collect as much as they can, all at once. Co-signers can then see their scores drop when loans that they are responsible for are marked as being in bankruptcy — even if they did not file for it themselves.

Bankruptcy can be quite useful in Wisconsin, but be sure you know all of the ramifications of filing, especially if you're a co-signer on a loan.

Source: Credit.com, "My Co-Signer Filed for Bankruptcy. Will I Be Affected?," Jeanine Skowronski, Nov. 02, 2015

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SEE HOW NICOLET LAW MAKES A DIFFERENCE IN OUR CLIENTS’ CASES

CAR ACCIDENT

Result with Nicolet Law 
$1,200,000.00

CAR ACCIDENT

Offer before Nicolet Law
$50,000.00

SEMI-TRUCK ACCIDENT

Result with Nicolet Law 
$700,000.00

SEMI-TRUCK ACCIDENT

Offer before Nicolet Law
$75,000.00

SLIP AND FALL ACCIDENT

Result with Nicolet Law 
$180,000.00

SLIP AND FALL ACCIDENT

Offer before Nicolet Law
$5,000.00

PEDESTRIAN HIT BY CAR

Result with Nicolet Law 
$1,050,000.00

PEDESTRIAN HIT BY CAR

Offer before Nicolet Law
$0.00 - denial

DRUNK DRIVING ACCIDENT

Result with Nicolet Law 
$815,000.00

DRUNK DRIVING VICTIM

Offer before Nicolet Law
$0.00

UTV ACCIDENT

Result with Nicolet Law 
$250,000.00

UTV ACCIDENT

Offer before Nicolet Law
$5,000.00
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12 locations in Wisconsin and Minnesota to serve you

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Wisconsin Locations:

EAU CLAIRE:

402 Graham Ave.
Suite 305
Eau Claire, WI 54701

Phone: (715) 835-5959
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HUDSON:

517 2nd Street
Unit #205
Hudson, WI 54016

Phone: 715-226-6158
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LA CROSSE:

119 N 19th St S
La Crosse, WI 54601

Phone: 608-527-0876
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NEW RICHMOND:

1500 Madison Ave.
Suite 220
New Richmond, WI 54017

Phone: 715-226-6164
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RICE LAKE:
337 North Main Street
Rice Lake, WI 54868

Phone: (715) 790-1114
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RIVER FALLS:
215 S 2nd St #20
River Falls, WI 54022

Phone: (715) 716-5869
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SUPERIOR:
1200 Tower Ave.
Superior, WI 54880

Phone: (715) 718-2969
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WAUSAU:
408 3rd Street
Suite 303
Wausau, WI 54403

Phone: (715) 716-5092
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Minnesota Locations:

DULUTH:
306 West Superior Street,
Suite 606 West
Duluth, MN 55802

Phone: (218) 729-0628
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HIBBING:
Howard Court Bldg.
302 Howard Street, Suite 123
Hibbing, MN 55746

Phone: 218-217-0659
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MINNEAPOLIS:
225 South 6th Street
Suite 3900
Minneapolis, MN 55402
Phone: (608) 315-5639
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WOODBURY:
724 Bielenberg Drive
Suite 126
Woodbury, MN 55125

Phone: (651) 815-0017
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