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What Are a Creditor’s Rights When Collecting from Cosigners?

 Posted on September 10,2019 in Debt Collection

What Are a Creditor’s Rights When Collecting from Cosigners?A person looking to create a loan agreement may need a cosigner if the creditor is uncertain whether the borrower will be able to continue making payments until the loan is repaid. As a creditor, a cosigner may allow you to take a chance on a potential client by mitigating some of the risks. If the borrower defaults on their debt, you have another party that you can order to repay the loan. However, the cosigner will want to avoid paying you if they can get out of it. You must understand the rights of creditors and cosigners and the circumstances under which the cosigner is liable for the debt.

When Can You Collect from a Cosigner?

According to Illinois law, creditors are not allowed to take collection action against a cosigner until:

  • The primary debtor has defaulted on or is delinquent on the debt;
  • The creditor has notified the cosigner of this via first-class mail; and
  • The cosigner has had 15 days to repay the debt in full or make arrangements for repayment.

The cosigner may try to delay full repayment by asking for forbearance to catch up on payments or to refinance the loan for the primary debtor. You must assess whether it is worthwhile to delay the collection process or allow the debtor to modify the repayment plan. The debtor may lack the financial resources to continue the loan payments on their own, making collection from the cosigner inevitable.


The primary debtor may file for bankruptcy protection before you are able to collect the debt from the cosigner. Whether you can still collect from the cosigner depends on which type of bankruptcy the debtor uses:

  • With Chapter 7 bankruptcy, the cosigner is liable for the debt, even after discharge; but
  • With Chapter 13 bankruptcy, the cosigner is protected by the automatic stay.

Discharge after Chapter 7 applies to the debtor who filed for bankruptcy. The debt still exists for the cosigner, who will become the primary debtor. With secured debts, the cosigner will be liable for any deficiency after you sell the secured property to recover the debt. With Chapter 13, the stay will no longer protect the cosigner if the debtor does not include your debt in the repayment plan.

Contact a Chicago Creditor’s Rights Lawyer

You may need to take legal action if a cosigner is not complying with the terms of the loan agreement. A Chicago creditor’s rights attorney at Dimand Walinski Law Offices, P.C., can help you retrieve the debt from the primary debtor or the cosigner. To schedule a consultation, call 312-704-0771.


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