cosigner debt

January 8th, 2016 by Questions

My sister cosigned a loan for her daughter for her to consolidate her debts, her daughter stopped paying on the loan so my sister removed her daughter from the loan and did something ( maybe added it to her mortgage?) So she could have a lower interest on it. My question is If her daughter files for bankruptcy will she be able to include the money she owes my sister for that loan? I’m confused by it because by getting the loan from the bank; she would be paying the bank but because she faulted my sister was responsible as the cosigner, however for my sister to afford the extra expense she removed her daughter’s name and assumed the loan herself. If her daughter files for bankruptcy and includes the bank loan, does that mean my sister will not be able to collect any money from her daughter? Also, if her daughter includes the loan in the bankruptcy and she says it’s a bank loan and they incorporate it as such, will it make a difference seeing as her name is no longer attached to it?

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One Response to “cosigner debt”


January 09, 2016 at 11:51 am, Doug Stuive, CA | Trustee | CIRP said:

If your niece declares bankruptcy the person she owes for the loan is now her mother. Your sister has taken over responsibility for the loan by removing your daughter’s name and according to the bank she is now solely responsible for making the loan payment. If the expectation between your sister and her daughter is that she is to be repaid for the loan then your sister is now the creditor. Your sister would be listed as a creditor on your niece’s bankruptcy documents and upon her discharge your niece would have no legal responsibility to pay her mother back. Your sister would also have no legal means available to her for collection as her daughter would be protected from collection activity under the Bankruptcy and Insolvency Act.

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