Automatic Stay For Co-Debtors In Chapter 13 Bankruptcy

 The automatic stay in bankruptcy makes it illegal for any creditor to take action to collect a debt while an individual is in bankruptcy.  A bill collector cannot call the individual on the phone, take the debtor to court, or garnish wages while the bankruptcy is pending.

One advantage of a Chapter 13 Bankruptcy  is that the automatic stay can also cover a co-debtor who has not filed for bankruptcy.  Thus if a man cosigns for his daughter’s car loan, and the daughter goes bankrupt, the car lender would not be able to come after the father, if she filed under Chapter 13.  If it were a Chapter 7 bankruptcy the man would have no such protection.

There are several conditions for the automatic stay to apply to the co-debtor.  The co-debtor must be an individual, and the loan must be a consumer debt.  In addition the creditor could have the automatic stay lifted, if the co-debtor was the one receiving the consideration for the debt, or if the Chapter 13 plan did not provide for the full payment of the debt.  However, lifting the automatic stay requires the creditor to bring a motion to court and request this relief from the judge.