A cosigner is someone who attaches themselves to an auto loan to help a primary borrower qualify. This means they sign the loan documents and become legally obligated to the loan. If your cosigner files for bankruptcy, what does it mean for you and your car loan? Read on to find out.

Your Car Loan Isn’t Affected

Is My Car Loan Affected if My Cosigner Files for Bankruptcy?The good news is that if your cosigner does end up filing for bankruptcy, it doesn’t affect your auto loan or your credit score.

The car loan is in your name, and your cosigner doesn’t have ownership of the vehicle despite the loan being listed on their credit profile. As long as you, the primary borrower, continue to make monthly payments on time, your cosigner’s decision to file for bankruptcy doesn’t impact you.

One thing that may occur is that the loan gets listed on your credit reports as having gone into bankruptcy. What this means is that the loan, not you, is listed in a bankruptcy due to your cosigner filing.

Because your cosigner is on the loan, it gets included in their bankruptcy filing. Keep in mind that this does not affect your credit score, but if for some reason it does, dispute it with the credit bureau and have it removed.

Despite your cosigner’s circumstances, you should let your lender know what’s going on. It doesn’t hurt to reassure them that you’re still committed to successfully completing the auto loan and are going to continue paying on it.

Preventing Bankruptcy before it’s too Late

Whether you or your cosigner decides to file for bankruptcy, it should be a last resort option. Filing for either a Chapter 7 or Chapter 13 bankruptcy is a serious matter, and impacts your credit score and finances greatly. You should consider options other than bankruptcy, and you may be surprised by what you can do.

If making car payments is an issue for you, the best thing you can do is reach out to your lender and let them know what’s going on. Your lender may let you skip a payment and tack it onto the following month’s payment, or the end of the loan term.

Your lender may also suggest refinancing to lower the monthly payment by either extending the loan term, or by you qualifying for a lower interest rate. If you’re considering refinancing, check out what our trusted partner can offer here.

The Bottom Line

Your cosigner’s decision to file for bankruptcy doesn’t affect your auto loan as long as you continue to make payments on time each month. If you have any further questions, reach out to your lender and explain the situation.

If you ended up filing for bankruptcy, lost a vehicle in the process, and need a new one, let us help. At Auto Credit Express, we have over 20 years of experience getting consumers connected to local special finance dealerships.

Let us help you find a dealer in your area. Simply fill out our fast, free, and easy car loan request form to get started!