I tell this person that if he files bankruptcy the bank will look to his father to pay the loan.
Cosigner bankruptcy – Joint Debts
Sometimes the question is: “My wife has a joint credit card with me but all the debt on the card is my debt. Will she be affected?”
Some people, when I explain that the cosigner will be responsible for the debt, ask me what happens if he doesn’t declare the debt in his bankruptcy.
I point out that doing this is a serious offence under the Bankruptcy and Insolvency Act and could lead to him being in bankruptcy for a longer time or having charges laid against him by the RCMP.
So, how does a person explain to his cosigner that he is going into bankruptcy and the co-signer will be responsible for the debt?
I tell this person that the best thing to do is to explain to his co-signer that he must file bankruptcy and unfortunately that will mean the cosigner will be responsible for the debt.
I further advise that he cannot tell the cosigner that he will repay him, as that is forbidden under the Bankruptcy and Insolvency Act.
I do point out that after he has been discharged from bankruptcy he can voluntarily repay some or all of his former creditors.
Cosigners Bankruptcy – in a Consumer Proposal
I had a person come to me for his free initial consultation.
After reviewing his financial information and discussing options with him he decided that a consumer proposal would be the best option for him. In his proposal he would be offering to pay 50% of his debt to the creditors over 60 months.
Then he said: “What about my uncle, who cosigned the bank loan which now stands at $10,000?”
I suggested that his uncle should payout the bank loan and then take the place of the bank in the consumer proposal.
That way he would be paid approximately 50% of his debt.
I further suggested that his uncle could get independent advice from an insolvency lawyer as to his best course of action.