Co-Signed Into Bankruptcy

Jeff's wife is about to have an old co-signing disaster catch up with her. How much damage will it cause?

QUESTION: Jeff’s wife co-signed for a loan with her ex-boyfriend before they met, and now creditors are harassing her. An attorney recommended Chapter 7 bankruptcy, but the debt is only $5,000. Dave thinks a cash settlement is a much better idea, but he has some conditions.

ANSWER: I’m not filing Chapter 7 bankruptcy over $5,000! That’s stupid to lose your whole life over that. Offer them $3,000 in cash as settlement in full, and get it in writing before sending them any money. She’s going to pay some stupid tax for doing this, but settling is what I would do. Fight with them until they come down to what you can pay. Don’t give them access to your checking account, and no post-dated checks.