Consider Co-Signers When Making Bankruptcy Decisions
One factor to consider when determining whether to pursue a Chapter 7 bankruptcy or Chapter 13 bankruptcy petition is the impact of each on co-signers. If someone has co-signed a loan for you, that person has guaranteed payment of the loan. If the account is delinquent, your late or missed payments may already have harmed your co-signers credit. And if you discharge the loan in a Chapter 7 bankruptcy, the co-signer remains responsible for the full amount of the debt.
On the other hand, if you file for bankruptcy protection under Chapter 13, your co-signer will be protected so long as you make timely payments under your Chapter 13 plan.
There are other factors, of course, and not all debtors are eligible for both types of bankruptcy and so may have the decision made for them--but if you are considering bankruptcy and have loans co-signed by friends or family, you should be aware of the difference in the way they'll be impacted by Chapter 7 bankruptcy versus Chapter 13.
My wife and I live in IL and are considering filing chapter 7. Her parents co-singed on a car loan for her a couple of years ago but they have recently paid the balance in full for the vehichle. The tiltle is now in her name but we will have to keep paying them as we would've the bank. My question is would this be considered her property and could it be liquidated?