How Bankruptcy Affects Joint Accounts and Co-Signers in Pennsylvania

Filing for bankruptcy in Pennsylvania can offer much-needed financial relief, but it also has important consequences for joint accounts and co-signers. Understanding how bankruptcy impacts these relationships is essential before taking action. At Tadross Law, we help Pennsylvania residents navigate these difficult situations with clarity and guidance.

Joint Accounts and Bankruptcy

When a person files for bankruptcy, any joint accounts they share with another individual may be affected. In Chapter 7 bankruptcy, the filer’s share of funds in a joint account can be considered part of the bankruptcy estate. This means creditors may attempt to access those funds, even if they belong partly to the other account holder. In Chapter 13 bankruptcy, funds in joint accounts are generally safe, but they may still factor into repayment plans.

Pennsylvania law allows joint account holders to claim ownership of their share of the account. However, disputes often arise when determining what percentage of the funds belong to the filer versus the other account holder. It is important to have proper documentation to protect the non-filing party’s portion.

Co-Signers and Bankruptcy

Co-signers take on responsibility for another person’s debt, such as a loan or credit card. Bankruptcy can directly affect them. In Chapter 7, the filer’s obligation may be discharged, but the co-signer remains fully responsible for the debt. This means creditors can still pursue the co-signer for repayment.

In Chapter 13 bankruptcy, however, there is a co-debtor stay that temporarily protects co-signers from collection efforts while the repayment plan is active. Once the plan is complete, the filer’s debt may be discharged, but depending on the type of debt, co-signers may still face liability if not fully repaid through the plan.

Protecting Joint Account Holders and Co-Signers

If you have joint accounts or co-signers, careful planning is crucial before filing for bankruptcy. Steps such as documenting ownership of funds, understanding your repayment obligations, and exploring alternatives may help protect loved ones from unintended consequences.

At Tadross Law, we assist individuals in Pennsylvania with evaluating their options and protecting the financial interests of both filers and those connected to them.