How Bankruptcy Affects Joint Accounts and Co-Signers in North Carolina

Filing for bankruptcy can provide a much-needed fresh start, but it often raises concerns about how it will affect others connected to your finances. In North Carolina, the impact of bankruptcy on joint accounts and co-signers depends on the type of bankruptcy filed and the nature of the financial relationship. Understanding these effects is essential before moving forward.

Joint Bank Accounts

If you share a bank account with another person, such as a spouse or family member, that account may be impacted by bankruptcy. In Chapter 7 bankruptcy, your share of the funds is considered part of your bankruptcy estate. While the other account holder may argue that the funds are theirs, it can take time to prove ownership, and accounts may be temporarily frozen. In Chapter 13 bankruptcy, joint accounts are less likely to be disrupted since repayment is structured over time.

Joint Debts

When you file for bankruptcy, your liability on joint debts may be discharged, but the other party remains responsible. For example, if you and your spouse jointly hold a credit card, your bankruptcy eliminates your obligation, but creditors can still pursue your spouse.

Co-Signers

Co-signers take on the responsibility of paying if the primary borrower cannot. In Chapter 7 bankruptcy, your discharge does not protect co-signers, and creditors can pursue them directly. However, Chapter 13 bankruptcy offers a “co-debtor stay,” which temporarily shields co-signers from collection efforts as long as payments are made through the plan.

Protecting Your Financial Relationships

Before filing, it’s important to consider how bankruptcy will affect the people connected to your accounts and debts. Strategies such as filing under Chapter 13 or carefully documenting ownership in joint accounts can help minimize harm to loved ones.

At the Law Office of Calvin Craig, we assist Raleigh residents in navigating the complex effects of bankruptcy. We can guide you in understanding your options and protecting your financial future.