If a co-signer of a loan files Bankruptcy, does it affect the other's credit rating?

I think the question speaks for itself, but my mother=in-law has a situation where she co-signed a loan a number of years ago for someone's car. He's missed payments and basically screwed the whole thing up..and now he is filing bankruptcy. Will this adversley affect my mother-in-law's credit any more? thanks.

If a co-signer of a loan files Bankruptcy, does it affect the other's credit rating?
If she has co-signed and the primary borrower has defaulted, she will need to step up and pay. Otherwise, her credit will be dinged.
Reply:When your Mother-In-Law co-signed for the loan she made a legal agreement that said she would make the payments on the loan if the person she co-signed for does/can not make them.





So it will show on your Mother-In-Laws credit report that it was included in Bankruptcy of the other party. This alone won't really effect her credit, especially if the other person re-affirms the debt.





However, if the other party declares BK and does not re-affirm the debt your MIL now becomes totally liable for the loan. If she does not pay on the loan it could have a very negative effect. That is it will be a negative on her credit report and they could eventually come after her by filing a suit for the balance.
Reply:Your question and your additional information contradict each other. It sounds like your mother-in-law was the co-signer and "someone" is the primary borrower and this someone is the one filing for bankruptcy.





The only thing that will affect her credit is if the loan is not paid on time and in full. The other person's filing for bankruptcy is irrelevant. She promised to make the loan good. By the way, the loan will probably not be included in the bankruptcy because they usually don't include loans secured by liens on specific property, like a car title.
Reply:If she is the co-signor, yes, it will come back on her. The person that is filing the bankruptcy if they include it in the bankruptcy, it will be her reponsibility to make the payments on the vehicle, leaving her soley responsible for any balance left on the vehicle. It will all depend on what the person does in the bankruptcy regarding keeping it or re-affirming on the debt. Hope all works out for her!
Reply:I agree with riemannt, and SP, her credit has already been affected if this person has already defaulted on the loan. The bankruptcy has nothing to do with her, but she will have to pay that loan off, and there should already be a mark on her credit. If the loan is not paid, then the loan will show up as a bk on her report.
Reply:If he files a Chpt. 13, your MIL will not be held liable for the loan. A Chpt. 13 gives an automatic stay to both parties. Now if he doesn't reaffirm the debt or files a Chpt. 7, then she may have to worry about paying back the loan.


The bankruptcy will be noted on her reports but will not indicate if she has actually filed.
Reply:Yes, if the loan she co-signed is defaulted on and she doesn't pay it off.





(The loan she co-signed will NOT go into bankruptcy; it will come to her for payment. If she pays it, her credit will not be affected. If she does not pay it, the default will go against her)
Reply:The credit of your mother-in-law has already been affected if the person has not been paying. If the other person has filed bankruptcy, that alone will not affect your mother's credit. If they continue not to pay, your mother will be responsible for the payment.
Reply:IF the Primary Signee defaults, they come after you for the bill...


YES%26lt; it will screw up her credit if she doesn't then pay the bill.


Once he files, they can't collect from him and will come after her for the bad debt.
Reply:no but she will have to pay the note off.