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The bankruptcy process
Co-debtor stay
The co-debtor stay, also written codebtor stay, is a Chapter 13 protection that generally stops creditors from collecting a consumer debt from someone who owes it together with the debtor, such as a co-signer. 1
Talk to a lawyerHow it works
It starts when the Chapter 13 case is filed. From then on a creditor may not act, or start or continue a civil lawsuit, to collect the debt from the co-debtor. 2
It has limits. It covers consumer debts only, meaning debts incurred by an individual primarily for a personal, family or household purpose. It does not protect someone who became liable in the ordinary course of their business, and it ends if the case is closed, dismissed or converted to Chapter 7 or 11. 2 3
A creditor can ask the court to lift it. The court must do so to the extent that the co-debtor, not the debtor, received the benefit of the loan, the plan does not propose to pay the claim, or the creditor would be irreparably harmed by waiting. 2
The stay is about collection while the Chapter 13 case is open. If someone co-signed a debt for you, ask a bankruptcy lawyer how your case affects them. 2
Common questions
Does the co-debtor stay apply in Chapter 7?
What if my plan does not pay the co-signed debt in full?
The creditor can ask for relief from the stay to the extent the plan does not propose to pay the claim. On that kind of request the stay ends for that creditor twenty days after the request is filed, unless the debtor or the co-debtor files and serves a written objection. 2
Sources
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