Co-signers credit and bankruptcy
Once upon a time, when a person filed to receive protection under bankruptcy, the co-signer’s report immediately displayed the affected credit account as being “included in bankruptcy.” This would happen even in situations where the co-signer or you yourself continued to pay the credit account timely. This was automatically done.
Can Damaging Co-signer’s Credit Be Avoided?
Why would the credit report show that the account was included in the bankruptcy, when it, in fact, was being paid and continued through and after the bankruptcy.
Through the standard credit bureau reporting system, which formerly was known as Metro, the credit report was accounted for through listing of accounts. When accounts themselves were in a bankruptcy (simply based on the fact that one account holder had filed to receive protection under bankruptcy), the inclusion of the bankruptcy on the credit report provided an accurate description of the account whether everyone on that loan had filed bankruptcy.
This does not continue forward as a common problem, but on the contrary is quite rare. You would probably be surprised to find out that it is likely that you know many people who have had to file bankruptcy but who are now in better financial health than they were when they had to file bankruptcy.
During the 1990′s, credit bureaus transitioned into a new credit reporting system known as Metro 2. Metro 2 credit reporting was designed in order to accurately and completely identify specifically the credit for each individual consumer (which includes the specifics of the co-debtor, the specifics of the co-signer, etc.)” For this reason, the account specifically could–and also the report should–report specifically who is in a bankruptcy as the accurate person that filed and not the one who has not. So in this situation, the report should report that the account has been discharged for the person in bankruptcy, but should report that the account is current for the person who is not in bankruptcy as long as the account is being paid on time.