When someone in New Jersey considers filing for bankruptcy, one of the most common concerns is how the filing will affect joint account holders and co-signers. These individuals are often friends or family members who helped the filer obtain credit or share access to a financial account. Understanding the potential consequences in both Chapter 7 and Chapter 13 cases is essential before moving forward.

At The Law Offices of Andy Winchell, P.C., we can provide legal assistance to the Bedminster public and help you navigate these issues with clarity and confidence.

What Happens to Joint Accounts in Bankruptcy?

Joint accounts—such as shared checking, savings, or jointly held loans—can become complicated during bankruptcy. Here’s what you should know:

Bank Accounts

If you hold a joint bank account with someone else, the bankruptcy trustee may treat the funds as partially or fully yours, depending on your

contributions. This means:

• The trustee may investigate who deposited the money.
• Your share of the funds could become part of the bankruptcy estate.
• Your co-owner may need to show proof of their contributions to protect their portion.

Clear documentation is key in these situations.

Joint Loans and Credit Accounts

A joint credit card or loan means both parties are legally responsible for the debt. When one borrower files for bankruptcy:

• Your obligation is discharged, releasing you from the debt.
• The co-signer or joint borrower remains fully responsible, unless they file bankruptcy as well.

Creditors are still allowed to pursue the non-filing borrower for the full amount owed.

How Co-Signers Are Affected

Co-signers agree to repay a loan if the primary borrower cannot. Bankruptcy significantly impacts the co-signer’s liability depending on the type of bankruptcy filed.

Chapter 7 Bankruptcy

In Chapter 7:

• The filer’s obligation is wiped out.
• The co-signer remains 100% liable.
• Creditors can immediately pursue the co-signer for payment.

There is no legal protection for co-signers in Chapter 7 cases.

Chapter 13 Bankruptcy

Chapter 13 offers more protection:

• A co-debtor stay temporarily stops creditors from going after co-signers.
• As long as the repayment plan addresses the debt, the co-signer may avoid collection efforts.
• If the repayment plan does not fully cover the debt, the co-signer may still be responsible for any remaining balance.

This makes Chapter 13 a strategic option for individuals wanting to shield co-signers from financial harm.

Impact on Credit Scores

A bankruptcy filing will only appear on the credit report of the person who files—not on the joint account holder’s or co-signer’s report. However:

• If the co-signer becomes responsible for the debt and cannot pay, their credit can be damaged.
• Late or missed payments on joint accounts can affect both parties.

Protecting Co-Signers and Joint Account Holders

Before filing, consider:

• Removing the co-signer from accounts when possible
• Paying off or refinancing certain loans
• Filing Chapter 13 instead of Chapter 7 for added protection
• Closing joint credit accounts to prevent further charges

Every situation is unique, which is why legal guidance is essential.

Talk to a New Jersey Bankruptcy Attorney

Bankruptcy can provide a fresh financial start, but it also affects the people connected to your accounts. At The Law Offices of Andy Winchell, P.C., we can provide legal assistance to the Bedminster public and help you understand how your decisions impact joint account holders and co-signers. With the right plan, you can minimize harm and move forward with confidence.