Wilton, CA Bankruptcy Law Firms & Lawyers

You are not filing bankruptcy therefore you are not providing the courts with falsified documentation, however it sounds as though your sister should seek legal counsel. Honest information should always be provided to the courts. If the court does find fraudulent transactions, the consequences can be harsh, resulting in sanctions, dismissal of the case and the trustee can take hold of any property that he or she may see fit.

Bankruptcy shouldn't affect your tax return, but you may have to provide your bankruptcy trustee a copy of the return and turn over any refund to the trustee. Unless all of the refund was claimed as exempt on your bankruptcy petition, you will be required to give the refund check to the trustee to distribute to your creditors. Any portion that belongs to you will be returned to you.

As a co-signer you are actually a "co-maker" for the most part and are jointly and severally liable for the entire amount, regardless of whether the other party went through bankruptcy. Bottom line - your wife is on the hook for the shortfall.