Bankruptcy and Co-Signers
In a Chapter 13 reorganization:
- If the debtor has filed for Chapter 13 reorganization, the creditor or collector is prohibited from attempting to collect the debt from a co-signer.
- In Chapter 13, the debtor is trying to re-organize and pay a portion of his or her debt through a court-approved plan over a period of time, generally three years. The automatic stay in Chapter 13 bankruptcies protects both the debtor who has filed for bankruptcy, as well as any co-debtors on claims, as the stay protects an individual who is jointly liable for a “consumer debt” as defined by § 101(8) of the Code ─ “[a] debt incurred by an individual primarily for a personal, family, or household purpose[s].”