Apr
15
2009

Mortgage cosigner’s credit report not affected by bankruptcy

Dear Experian,

If two single people co-sign on a home mortgage and one of them files for Chapter 13 bankruptcy, will the credit report of the other co-signer for the home mortgage be affected, even when the mortgage payments are kept current?

- LMS

 

Dear LMS,

When you cosign for a loan, you are agreeing to share full responsibility for the debt. As a result, the mortgage account will appear on both your credit report and the other person’s. However, the bankruptcy should not affect your credit report.

There are two components to bankruptcy that can appear in your credit report. The first is the bankruptcy public record. The court filing will appear in the credit report of the person who filed for bankruptcy. A completed Chapter 13 bankruptcy will remain for seven years from the filing date.

The second component is the status of each account included in the bankruptcy. A status is shown with each account in your credit report. For instance, it might say “current” or “30 days late.” The status might be a combination, such as “current, was 30 days late,” meaning it is now being paid on time but had been 30 days late in the past.

The status line for accounts in bankruptcy will state, “account included in bankruptcy.”

Both will appear in the credit report of the person that declared bankruptcy, if they included that account in their filing. The good news is that neither will appear in your report if you did not declare bankruptcy.

Experian checks your credit report for the presence of the bankruptcy public record when an account is reported in bankruptcy. If there is no public record, the status of the account will not indicate it is included in bankruptcy.

As a result, if the mortgage is kept current, there should be no adverse impact on your credit report.

Thanks for asking.

- The “Ask Experian” team

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