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How to Protect Your Co-Debtor in Chapter 13


When an individual files a personal bankruptcy, he or she gains the advantage of having the automatic stay. The automatic stay goes into effect as soon as your bankruptcy petition is filed and it prohibits creditors from pursuing any further collection actions against you.

If you file a Chapter 13 case, you are also given the benefit of the co-debtor stay, which prohibits creditors from taking collection actions against the relatives, friends or other parties who co-signed loans with you or guaranteed your loan. The co-debtor stay is effective as long as your Chapter 13 bankruptcy case is pending.

While the co-debtor stay protects your co-borrowers from collection actions, it does not change or eliminate the co-debtor’s financial obligations under the terms of the loan. Additionally, the co-debtor stay is not available under Chapter 7. Finally, there are some instances where the co-debtor stay does not apply. For instance, the stay does not prevent collection efforts against your co-borrower if the debt was incurred in the “ordinary course of business” by the debtor.

Pursuant to 11 U.S.C. §1301, in order for the co-debtor stay to apply, the following must occur:

  • A Chapter 13 bankruptcy is filed by the primary debtor.
  • The debt is not a business-related debt (a consumer debt is one incurred for personal use).
  • The co-debtor is an individual.
  • The debt was not incurred by the co-debtor in the “ordinary course of business.”
  • The Chapter 13 case must be pending (which means it is not closed, dismissed, or converted to a Chapter 7 or Chapter 11 case.

If the above five criteria have been met, the co-debtor stay is effective for the life of the Chapter 13 plan. One of our seasoned bankruptcy attorneys can help you understand whether the required criteria have been met for the co-debtor stay to apply in your filing.

If you are considering filing a bankruptcy and you need help determining which type of filing would be best for you, contact Fitzgerald & Campbell to schedule an appointment. We do not offer just one debt relief option, we don’t push you in one direction. If bankruptcy right for you, we will tell you. If it’s not, we will tell you that. If bankruptcy is your get out of debt plan, it needs to be done right. It needs to be in the hands of experienced lawyers who have been there before. Contact us today!

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