It’s important to remember that in Personal Insolvency and in Bankruptcy debts will be written off against only the borrower applying for insolvency or bankruptcy. As most loans that were taken out by more than one borrower are “joint and several” this means that where one party has been adjudicated bankrupt the full debt remains due from the other borrowers.
This is also true with guarantors. A guarantor’s liability is a contingent liability – in other words, the guarantor gets called upon where the principal debtor has defaulted. Where a borrower applies for insolvency or is declared bankrupt, there’s an automatic event of default which means that the lender can call upon the guarantor to make good on the guarantee.
In short bankruptcy and insolvency does not assist co-borrowers or guarantors and often makes their situation worse.