Legal Question in Bankruptcy in New York
Pay cosigned loan before bankruptcy
I lost my job approx. 18 months ago and received a severence check. I kept the severence in the bank because I was fortunate enough to find another job. Eventually I took 75% of the severence and paid it towards my childs college loans which I have always paid. I just wanted to bring down the monthly payments and obviously pay down the principal. I still have a little severence left but now my dilemma is that I have been laid off again, only a few weeks after I used this money to pay the student loans. I was contemplating chap. 7 bankruptcy because things are getting tight but a friend advised me that she thinks that since I paid my childs loan down (which has always been agreed that I would pay for college) that I can't file because it will cause problems. Is it true that I have to wait a long time even though I am unemployed and probably meet all the other criteria such as income, equity in home, etc. Thanks for any guidance.
1 Answer from Attorneys
Re: Pay cosigned loan before bankruptcy
If you had cosigned for the student loan, then paying down the loan does not prevent you from filing for bankruptcy now. If the repayment was made within the ninety days prior to filing for bankruptcy, then it must be disclosed on your bankruptcy petition(if over $600. In that case, a bankruptcy trustee can try to recover the amount paid to the creditor in order to redistribute it to all of your creditors. This does not affect your ability to file for bankruptcy or to get a discharge of your debts. If the student loan is guaranteed by the government, then it is nondischargeable and you must repay it anyway.
In either case, what matters is whether you can account for what you did with your savings in the period leading up to filing for bankruptcy.
Please contact my office directly if you would like to discuss your situation further. You may also visit my website at amdlaw.com for more information.
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