On Joint Filing – Once the divorce is finalized, you and your ex-spouse can no longer file a joint bankruptcy petition. How your bankruptcy filing can affect your ex-spouse depends on which chapter of bankruptcy you choose to file.

On Dividing Belongings – When you go through a divorce you need to divide your debts and belongings between yourself and your ex-spouse. Laws vary between states so speak further with a bankruptcy attorney to find out what responsibilities you have for various debts and belongings.

On Filing Chapter 7 – If you or your ex-spouse file for Chapter 7 bankruptcy and debt that was held jointly during your marriage gets discharged, then creditors may be able to collect that debt from the non-filing spouse.

On Filing Chapter 13 – If you or your ex-spouse file for Chapter 13 bankruptcy, most debts are eventually repaid and the non-filing spouse is typically protected from having responsibility of any debt. Cosigners and co-debtors are more protected in Chapter 13 than in Chapter 7.

While bankruptcy discharges many debts, debts such as child support and alimony cannot be erased. Consulting a divorce attorney about adjusting the terms of your divorce could be a helpful option.

Depending on which chapter bankruptcy you file (chapter 7 or chapter 13), cosigners may be affected differently. If you file a Chapter 7 bankruptcy, most debts are completely discharged, which means you are not responsible for payment. However, your cosigner is still responsible for making payments. If you file a Chapter 13 bankruptcy, you will be responsible for making payments according to the terms outlined in your repayment plan. As long as you make payments according to your chapter 13 schedule, your cosigners are not responsible for paying your debt.

But bottom line: any payment you fail to pay or pay late will damage both you and your cosigner’s credit. If you have a cosigner in a business loan, they are not at all protected by bankruptcy filings.

Because in many cases cosigners are close friends or relatives that have offered a helping hand, it can be very difficult to know that your bankruptcy filing will likely negatively affect them. While it is a very unfortunate consequence of bankruptcy, you need to make sure you decide which chapter of personal bankruptcy to file by choosing the one that will work best for you. Your cosigner did take on significant legal responsibility and personal risk by signing the lending papers and should understand the consequences.

Before filing, I strongly suggest speaking with a bankruptcy attorney who can help you identify the best direction to take and who can make sure that your best interests come first.