Thursday, April 5, 2012
What does it mean if someone listed me in their bankruptcy as a Co-Debtor?
The reason that the code requires that all co-borrowers receive notice is because whenever there is a joint debt, the individual co-borrowers have “contingent, unliquidated claims” against all the other borrowers. Put another way, if Danny and Alice borrow $5,000.00 jointly, and Danny doesn’t pay , the lender can sue Alice and force her to repay all of the $5,000.00. Alice can then sue Danny and force him to contribute to the payment of the judgment obtained against Alice. However, in the event Danny files for bankruptcy, neither the original lender, nor Alice can sue Danny in an attempt to collect the balance even if the lender seeks to collect against Alice.
In this case, Alice would be best served to speak to a bankruptcy attorney, because she has a very limited time to do what she can to protect her claim, if anything. Alice’s right to collect any money from Danny is very fact specific, and the whole story will determine whether Danny’s “contingent” debt to Alice can similarly be discharged. If you find yourself owing a joint debt with someone who has recently filed for bankruptcy , contact Attorney Matthew P. Trask to discuss your rights and obligations.
To read more about co-debtors and bankruptcy, see our post What happens to my Cosigner if I file for Bankruptcy.