G is for guaranty in my Bankruptcy Alphabet.
A guaranty is just as much a debt as the bills one incurs directly, yet guaranties are often forgotten when the list of creditors is assembled to file bankruptcy.
Any time you sign for a debt, yours or someone else’s, you create a legal relationship. The lender or card issuer has obtained the right to sue you on your guaranty for the debt involved.
Usually, the creditor doesn’t even have to sue the other borrower first. So guaranties come with some real financial exposure.
If you think of your creditors as just those people who send you a bill monthly, you’re likely to miss a number of creditors. It is an absolute rule that when you file bankruptcy, you include all of your creditors.
Whether or not a debt is now due, whether it may only be payable when someone else can’t pay, or even it you dispute that you owe the debt, the debt should be listed in your bankruptcy papers.
Lots of my clients tell me that they are only “secondarily liable” for a loan, or they are “just a co signor” for a debt. They miss the fact that any kind of liability at all makes the other party a creditor.
I ask clients to tell me about any situation where they are a guarantor, a co signor, a co borrower, or a second party. We also want to find debts where the client disputes that there is any debt at all. Bankruptcy can discharge debts that have never been decided by a judge.
I can only guaranty my clients the bankruptcy outcome they want if they list everyone to whom they owe money or might owe money.
This post has been brought to you by the letter “G”.
Image courtesy of takomabilelot