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Bankruptcy and a Cosigner

Discussion in 'Bankruptcy Law' started by Bob Barker, Mar 29, 2021.

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  1. Bob Barker

    Bob Barker Law Topic Starter New Member

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    Jurisdiction:
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    Can a person file for bankruptcy and have it approved on a car loan with a cosigner if the cosigner was never notified by the court of the bankruptcy or had a chance to address the court?

    Backstory. Person A and B buy a car together and cosign on a loan Jan 2020. Person A declares bankruptcy a year later which according to Person A is effective April 1, 2021. Person B did not know of the filing and was never notified by Person B's attorney or court of such bankruptcy. Additional property taxes and DMV fees are also involved. All the loan documents and registrations are different. Person A is primary and Person B secondary and vice versa, depending on which document you read. Its a mess really.

    Person B is just trying to figure out what rights they have in addressing any bankruptcy of Person A with regards to the loan and subsequent taxes and fees owed.
     
  2. zddoodah

    zddoodah Well-Known Member

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    I'm not really sure what the highlighted words mean.

    I'm not sure what Person A could possibly mean by this. For starters, merely "declar[ing] bankruptcy" is a meaningless act. I'll assume for purpose of this example, however, that it means Person A filed a bankruptcy petition in January 2021 (and, for the time being, I'll assume it was a Ch. 7 petition). Notwithstanding those assumptions, I have no idea what Person A might mean by his/her statement that it "is effective April 1, 2021."

    Not really sure what "primary" and "secondary" might mean in this context. Unless one of them is merely a co-signer, it makes no difference whose name is listed first.

    Again, I'm not sure what you mean by this. If the BK court determines that Person A is entitled to a discharge, then he/she will be off the hook in relation to the car loan and related obligations.

    Are you Person B? If so, when did Person A claim to you that the BK "is effective April 1, 2021." Since April 1 is three days from now, have you obtained any documents relating to the BK case? Depending on your relationship with Person A, you might want to consult with a local BK attorney ASAP to see about potentially objecting based on your own interest in the vehicle.
     
  3. Bob Barker

    Bob Barker Law Topic Starter New Member

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    Im not sure why the website highlighted those words.

    Person A told Person B that its effective April 1.

    Im not Person B, but very aware of the situation. No documents have been received from Person A or the court to validate the filing of bankruptcy. Wouldn't the court or Person A's attorney be required to notify all potential creditors including cosigners on loans? Person B doesn't even now you the attorney is or which court it was allegedly filed in.

    Person B still intends on filing a separate claim against Person A for all owed debts after April 1, that are not specifically discharged in the "alleged" filing of bankruptcy. Yes, Person B has a lawyer building a case now - and yes, Person B did ask their attorney the same questions BUT the attorney has not answered the questions; hence asking here.
     
    Last edited: Mar 29, 2021
  4. flyingron

    flyingron Well-Known Member

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    Person B has the right to pay the loan obligation that they signed up for when they became the cosigner. Other than that, they don't have any. They have no right to be "notified" of anything with regard to the bankruptcy. They are NOT a creditor of A just for being a cosigner. They have no right to the vehicle unless they are also a co-owner on the title.

    Unless there was some prior loan contract between A and B, there's little that can be done at this point. B has no rights in the bankruptcy, and can't even pursue anything against A while the bankruptcy stay is effect.

    This is what happens when you sign up as a cosigner. If the other borrower doesn't pay for whatever reason, it's on you. You can file your own bankruptcy if you are insolvent.
     
    army judge likes this.
  5. Bob Barker

    Bob Barker Law Topic Starter New Member

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    Thank you all. I will pass this on...
     
  6. zddoodah

    zddoodah Well-Known Member

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    The website didn't. I did -- in order to make my point more clear.

    That's not responsive to what I asked. You wrote, in your original post, that, "according to Person A[, the bankruptcy] is effective April 1, 2021." I asked when Person A made this claim. Was it last Friday or six months ago or somewhere in between?

    So...you have no personal stake in the matter whatsoever? What is your relationship to Person A or Person B?

    Any particular reason why Person B has not attempted to acquire documents relating to the BK?

    The court? No. The court has no idea who a person's creditors, except to the extent the creditor discloses the creditors on his/her BK schedules. Should Person A have listed Person B on his/her schedule of creditors? Maybe (although not apparently based on what you've told us so far), but even if the answer is yes, that failure isn't going to prevent a discharge or result in any negative consequences for Person A. Since Person B obviously became aware of the BK, it is incumbent on Person B to seek out and obtain relevant documentation. Keep in mind that, even if Person B had been scheduled as a creditor, it wouldn't likely change anything. Person B would be a non-priority, unsecured creditor, and there is almost never any money from a Ch. 7 BK for creditors of that class to receive anything.

    A BK should be filed in the district where the debtor lives. Person B can go to this website and use the "Federal Court Finder" to locate the appropriate court. Person B can then use PACER to look up the case.

    Since you haven't explained (perhaps because you don't know) what the "effective" date (April 1, 2021) means, it's impossible to know if that's a good or bad idea. Also, BK courts do not "specifically discharge[]" debts. The debtor either will be discharged or he/she won't. If you or Person B or the lawyer Person B is speaking with thinks that means any debt not listed is fair game for a lawsuit, then I hope the lawyer will enjoy explaining to the BK court why he/she shouldn't be sanctioned.
     

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