Co-debtor stay · Beverly Hills
The Co-Debtor Stay: Protecting a Co-Signer
The co-debtor stay protects a co-signer in Chapter 13. It stops creditors from collecting a consumer debt from a family member or friend who signed with you, as long as your case is open. Call (310) 362-9071 to find out how it can protect the people who helped you.
- Applies in Chapter 13 only, not Chapter 7
- Covers consumer debts, not business debts
- Lasts while the case is open, unless the court lifts it
At a glance
What the co-debtor stay does
When you file Chapter 13 bankruptcy, the automatic stay protects you. The co-debtor stay, in 11 U.S.C. 1301, extends that protection to another person who owes the same consumer debt.
That person might be a parent who co-signed your car loan, a spouse on a joint credit card, or a friend who signed for a personal loan. While the stay is in place, the creditor cannot sue them, call them to collect, or garnish their wages for that debt.
The stay lasts until your case is closed, dismissed or converted to Chapter 7, unless the court lifts it sooner.
Limits on the co-debtor stay
- Consumer debts only. The debt must be for personal, family or household purposes. A business loan your partner co-signed is not covered.
- The co-signer is not discharged. The stay pauses collection. It does not erase the co-signer's duty to pay. If your plan pays the debt in full, the issue goes away. If not, the creditor can go after the co-signer for the unpaid balance once the stay ends.
- Chapter 7 does not have it. In Chapter 7 bankruptcy, a creditor can pursue your co-signer as soon as you file.
- Personal guarantees of business debt. A personal guarantee of a business loan is generally not a consumer debt, so the co-debtor stay may not apply. See business bankruptcy.
When a creditor can get the stay lifted
A creditor can ask the court for relief from the co-debtor stay. Under 11 U.S.C. 1301(c), the court can grant it if:
- The co-signer got the benefit. If the co-signer, not you, received what the loan paid for, the creditor can go after them. Example: you co-signed your adult child's car loan, and your child drives the car.
- Your plan will not pay the debt. If your plan pays only part of the claim, the creditor can collect the unpaid part from the co-signer.
- The creditor would be irreparably harmed. For example, if waiting would cause the creditor a loss it could not recover.
If the creditor files a request and no one objects in time, the stay can be lifted without a hearing.
How to keep your co-signer protected
- Pay the co-signed debt in full through the plan. This is the clearest way to protect a co-signer for the whole case.
- Keep up with plan payments. If the case is dismissed, the co-debtor stay ends too. See why Chapter 13 cases get dismissed.
- Tell us about every co-signer. We list them so the creditor and the court know who is protected.
- Plan the payment. Paying a co-signed debt in full raises your Chapter 13 plan payment. We build that into your budget.
For many families, the co-debtor stay is the reason to choose Chapter 13 over Chapter 7. Compare the two in Chapter 7 or Chapter 13.
Common mistakes
- Assuming Chapter 7 protects a co-signer. It does not.
- Paying a family member back right before filing. Repaying a relative within a year before filing can be undone by the trustee. Ask us first.
- Not telling the co-signer. They may still get notices. Let them know what to expect.
- Mixing business and personal debts. Only consumer debts get this protection.
What it costs
- Chapter 7: flat attorney fee from $1,200, plus the $338 court filing fee
- Chapter 13: attorney fee quoted in writing, and part of it can be paid through the plan
- Payment plans are available, and the first consultation is free
More on Chapter 13 bankruptcy
- Chapter 13 bankruptcy in Beverly Hills
- Chapter 13 Eligibility and Debt Limits
- How a Chapter 13 Plan Payment Is Calculated
- Car Loan Cramdown and the 910-Day Rule
- Changing a Chapter 13 Plan After Filing
- Why Chapter 13 Cases Get Dismissed and How to Avoid It
- Chapter 13 Hardship Discharge
- The Co-Debtor Stay: Protecting a Co-Signer
- Mortgage arrears cure plan
- Second mortgage lien stripping in Chapter 13
- Converting Chapter 13 to Chapter 7
Co-debtor stay questions
Does the co-debtor stay protect my spouse?
Yes, the co-debtor stay protects your spouse on joint consumer debts when you file Chapter 13 alone. It does not cover your spouse's separate debts that you do not owe.
Does Chapter 7 have a co-debtor stay?
No, Chapter 7 does not have a co-debtor stay. Creditors can collect from a co-signer as soon as you file Chapter 7.
Will my co-signer's debt be wiped out?
No, your co-signer's debt is not wiped out by your bankruptcy. The co-debtor stay pauses collection. Paying the debt in full through your plan is the way to fully protect them.
Does the co-debtor stay cover business loans?
No, the co-debtor stay does not cover business loans. It covers only consumer debts for personal, family or household purposes.
Free consultation
Protect the people who co-signed for you
Call (310) 362-9071 or send the form. Bring a list of co-signed debts and we will show you how Chapter 13 can help.
Law Offices of John Asuncion9454 Wilshire Blvd., Penthouse Floor
Beverly Hills, CA 90212
(310) 362-9071
Monday to Friday, 9 a.m. to 6 p.m.