Filing for Chapter 13 bankruptcy has many advantages: it offers you a chance to prevent your home from being foreclosed upon and may prevent your car from being repossessed. Although there are many incentives, after filing for Chapter 13 bankruptcy, some care should be taken in making financial decisions going forward.
One financial obligation you should think twice about after filing for Chapter 13 bankruptcy is co-signing on a loan. In general, it is best not to apply for a new loan or co-sign on a loan after filing.
Now, this does not mean you will forever be prevented from applying for or co-signing on a loan in the future. Rather, it is merely prudent to establish a positive credit history and rehabilitate your credit rating before entering into a loan agreement. Not only does this course of action make financial sense, but it will ultimately lead to better terms on the loan if you wait until you have established some positive credit history.
If you feel you must co-sign on a loan, it would be wise to first discuss the situation with your bankruptcy attorney and receive authorization from your court-appointed trustee.
For those who are in dire financial straits, and are facing the possibility of foreclosure or repossession, filing for Chapter 13 may be the right approach. Consulting with a skilled bankruptcy attorney can help those individuals ensure they are following the necessary steps. Nevertheless, co-signing on a loan is not advisable shortly after filing for Chapter 13 bankruptcy.
Source: Fox Business, “Don’t Co-Sign a Loan While in Chapter 13 Bankruptcy,” Erica Sandberg, June 6, 2012.