Expert: Norma Duenas - California Bankruptcy Attorney - 6/27/2010

Question
I recently filed for chapter 7 bankruptcy and I was a co-signer on a car lease. I asked my attorney if it would have any effect on the person I co-signed for and I was told no. Now this person can no longer receive statements or view the account online and any payments made would be voluntary from now on. Also I was told by the car loan people that It would effect their credit as well and the only way to resolve all of this was to do a lease assumption agreement and if that wasn't done their account would be like that permanently and I was wondering if all this is true. I have not be discharged yet so I just wanted to know what would be best. Thank you

Answer
Generally if the person continues to make the payments on the vehicle it should not have a negative effect on their credit report. On the other hand if the payments are not made and he defaults then it can have a negative effect on the persons credit report. Many loan companies don't send statements because they fear that they are violating the bankruptcy laws. They are afraid that it will be seen as an attempt to collect on a debt that  has been included in a bankruptcy case. They are concerned that they could be sanctioned by the court. If the company does place a negative mark on the person's credit report, you should fight this as erroneous since that person has not filed for bankruptcy, and as long as he continues to make his regular payments on time, he neither has defaulted on his loan. If your need further information on the effect of bankruptcy filing on cosigners and authorized users you can go to http://www.socaladvocates.com/credit-reports