Let Our 30 Years Of Experience Work For You

Photo of attorneys Shelley Slafkes and Bruce Levitt
Photo of attorneys Shelley Slafkes and Bruce Levitt
  1. Home
  2.  | 
  3. Bankruptcy Basics
  4.  | Protecting Your Co-Debtor in Bankruptcy

Protecting Your Co-Debtor in Bankruptcy

by | Dec 27, 2023 | Bankruptcy Basics, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

When you file bankruptcy your co-debtors can be affected. How they are affected depend mostly on the type of debt is involved and whether you file a Chapter 7 or Chapter 13 bankruptcy.

In this blog we will discuss the impact of your bankruptcy filing on your co-debtors.

What is a Co-Debtor?

A co-debtor is any individual, including your spouse, who’s agreed to be legally responsible for making payments on your debt and agreed to pay the debt if you do not. For instance, if a family member or friend co-signed on your loan, mortgage, or other debt, they are your co-debtor for the purposes of bankruptcy.

Authorized users, such as those on a credit card, aren’t considered co-debtors because they’re not responsible for repaying the credit card debt.

The Bankruptcy Automatic Stay

Whether you file a Chapter 7 or Chapter 13 bankruptcy, as soon as you file your petition with the Bankruptcy Court, an automatic stay takes effect. The automatic stay prohibits creditors from taking further action to collect or enforce most types of debts.

You can learn more about the benefits of the automatic stay here.

Chapter 7 Bankruptcy Has No Co-Debtor Stay

In a Chapter 7 bankruptcy, the automatic stay doesn’t prevent your creditors from contacting or collecting debts from your co-debtors.  Additionally, your Chapter 7 bankruptcy discharge will not protect your co-debtor. Your co-debtor will remain liable to pay the entire amount of the discharged debt, even though you are no longer liable to pay.

Chapter 13 Bankruptcy Has a Co-Debtor Stay

If you file a Chapter 13 bankruptcy, the automatic stay extends to your co-debtors. This is commonly referred to as a co-debtor stay which is provided for in the United States Bankruptcy Code.

The automatic stay and the co-debtor stay prohibit a creditor from pursuing you or your co-debtor while the Chapter 13 bankruptcy is pending.

The reasoning is that as long as you, the debtor, are making your Chapter 13 plan payments, the creditor is being paid and the co-debtor will not face collection activity.

Is is important to note that if your Chapter 13 bankruptcy case is dismissed for various reasons including your failure to make your plan payments, both you and your co-debtor lose the protection of the automatic stay

Only Consumer Debts Receive Co-Debtor Stay Protection

Only consumer dets receive the protection of the co-debtor stay. There is no co-debtor stay for tax debt or business debt. That means that if your spouse files for bankruptcy and you do not, and you jointly file your taxes, you will not be protected by the automatic stay and you remain liable to pay the taxes.

Contact Levitt and Slafkes For Advice on Protecting Your Co-debtor

If you have questions regarding filing for bankruptcy or protecting a co-debtor, we can help. We are bankruptcy lawyers who know how to make a difference in your financial situation. We have experience you can rely on, and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C..

We are proudly designated as a debt relief agency by an Act of Congress.  We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.