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Since your wife was a co-signer on the account legally she is responsible, just as is her sister.
That said, since the lawsuit was already filed, and there is a court date, your wife’s sister would have to as k cascade to withdraw, and dismiss the case based upon her payment arrangement. Cascade will probably not withdraw it if your wife asks, but only the sister who is making payment arrangements. Since it was filed, and if they do not withdraw the action and file the paperwork with the court, then your wife and sister must appear in court on the court date. At the hearing, your wife can ask that the action be dismissed against her, and continue against the sister, and the sister can then sign a stipulation in court with Cascade’s attorney withdrawing the action as against your wife. If that does not work, and the attorney from Cascade will not agree to remove her, she can ask the judge to remove her from the action because the sister is assuming full responsibility in court.
That would be the only option at this point after the filing. If the case is withdrawn against your wife she can have any negative entry removed by submitting a copy of the court papers to the county clerk and the credit bureaus.
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