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Another person who is jointly liable with you on a debt is known as a "co-debtor". When you file bankruptcy, the co-debtor remains liable on the debt, unless the co-debtor is your spouse and you file a joint petition. If the co-debtor fails to maintain the payments on the debt, the failure to pay the debt will adversely affect his or her credit. In a Chapter 7 case, the creditor is free to pursue collection from the co-debtor immediately. In a Chapter 13 case, the creditor may be prevented from collecting from the co-debtor during the term of the Chapter 13 Plan. If you file aChapter 13 and the status of a co-debtor is important to you, you will need to discuss the circumstances of the debt in order to determine the likely impact on the co-debtor. It may be possible to put the debt in a special class to be paid in full to protect the co-debtor from collection activities.
If the bank or credit union at which you have checking or savings accounts is also a creditor (you have a loan, credit card account, or overdraft protection with the bank), then it is possible that the bank will put an "administrative freeze" on the funds in the account on the date the bankruptcy petition is filed. Such an administrative freeze will cause checks that have not cleared the bank to bounce. Therefore, you may want to open a new bank account with a bank where you do not owe any money prior to filing bankruptcy and cease checking activity in the old account several weeks prior to filing the petition. It is not necessary that you close the old account, but you may want to remove all but a few dollars from the account.
If your paycheck is automatically deposited to the account, you do not necessarily have to change the deposit. Funds that are deposited into the account after you file the bankruptcy cannot be frozen.
You must ultimately decide for yourself whether filing bankruptcy is the proper action to take, and if so, which Chapter is better for you.
Here are some factors to consider: