Chapter 13 – CoDebtors

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    The Chapter 13 Co-Debtor Stay:

    What It Is and How It Protects You

    Short answer: When you file Chapter 13, the co-debtor stay can temporarily stop creditors from going after a friend or family member who co-signed your consumer debt. It gives you breathing room to complete a repayment plan without your loved one being pressured.

    Co-Debtor Stay Generally

    • The co-debtor stay springs into effect the moment a Chapter 13 case is filed.

    • It bars collection from an individual who’s jointly liable with the debtor (or who pledged property to secure the debtor’s consumer debt).

    • It exists to protect the debtor’s fresh start—by preventing indirect pressure on the debtor through a spouse, parent, child, or friend who co-signed.

    • It is separate from the ordinary automatic stay. Even if the debtor’s automatic stay ends early for some reason, the co-debtor stay can still remain in place until it’s lifted or the case ends.

    • The co-debtor stay lasts until the Chapter 13 case is dismissed, converted, or completed (or a judge lifts it earlier).

    Key idea: The creditor’s rights aren’t erased—they’re paused while the Chapter 13 plan plays out.

    The Chapter 13 Co-Debtor (Who’s Protected)

    The stay protects an individual who is:

    • Personally liable with the debtor on a consumer debt, or

    • Secured the debtor’s consumer debt by conveying a property interest (for example, pledging a car as collateral).

    “Co-debtor” status is determined on the filing date. Debtors list co-debtors on Schedule H when the case begins.

    Applicability of the Co-Debtor Stay

    Consumer debts only

    “Consumer debt” means a debt primarily for personal, family, or household purposes (e.g., credit cards, medical bills, personal loans, most home and auto loans). It does not cover:

    • Taxes (not incurred voluntarily or for a household purpose)

    • Tort judgments (e.g., accident liability—again, not voluntary)

    • Business/commercial debts (incurred with a profit motive or in the ordinary course of a business)

    When a loan has mixed uses (some consumer, some business), courts look at the primary purpose or the borrower’s motive.

    Ordinary-course business exception

    Even when two people are both liable, the stay doesn’t apply to the extent the shared debt arose in the ordinary course of the co-debtor’s business operations (a narrow, fact-specific exception).

    Still in place even if the debtor’s stay is limited

    The co-debtor stay can continue even when the automatic stay is shortened or doesn’t arise in full (e.g., repeat filings), unless the court lifts the co-debtor stay.

    Actions Barred by the Co-Debtor Stay

    Creditors may not:

    • Start or continue lawsuits to collect from the co-debtor

    • Garnish, levy, or foreclose against the co-debtor or co-debtor’s property for the covered consumer debt

    • Repossess collateral tied to the co-signed consumer debt

    Acts taken in violation are typically void and can expose the creditor to sanctions under the court’s powers. (Courts use different legal hooks to award damages; bottom line—creditors violate it at their peril.)

    Important limit: The co-debtor stay does not shield the co-debtor from their own separate debts to that creditor. It applies only to the joint consumer debt connected to the Chapter 13 case.

    Negotiable Instruments

    A narrow exception exists: a creditor may present a negotiable instrument (like a check) and send any required dishonor notice to preserve rights under state law. This administrative step doesn’t open the door to broader collection while the stay is in place.

    Co-Debtor Stay Relief (When a Creditor Can Get It Lifted)

    A creditor can ask the bankruptcy court to lift the co-debtor stay. The court must grant relief—but only to the extent one of these is true:

    1. The co-debtor (not the debtor) received the benefit of the loan.

      • Example: Parent co-signs, child gets the car and all the value. The court can lift the stay to allow collection from the child.

    2. The Chapter 13 plan doesn’t propose to pay the claim.

      • If the plan pays 100%, stay relief is generally denied.

      • If the plan pays part (say 75%), the court may allow collection of the unpaid portion (the other 25%) from the co-debtor.

      • Fast track: If a creditor files a stay-relief motion on this ground, the co-debtor stay can terminate 20 days later unless the debtor or co-debtor files a written objection in time. (Don’t ignore these motions.)

    3. Irreparable harm to the creditor if the stay continues.

      • Rare and fact-intensive (e.g., co-debtor is about to abscond, an estate is about to distribute funds). Mere delay or routine plan payments typically aren’t “irreparable harm.”

    Post-petition interest

    • Debtors generally can’t pay post-petition interest on unsecured co-signed debts through the plan.

    • Some courts lift the stay so the creditor can pursue post-petition interest from the co-debtor while the case is pending; others require waiting until the case ends. Outcomes vary by jurisdiction.

    Practical Tips for Debtors & Co-Signers

    • List every co-signer on Schedule H so they’re protected.

    • If a creditor contacts or sues your co-signer on a joint consumer debt after your filing, save the proof and call counsel immediately.

    • If you get a motion to lift the co-debtor stay, act fast—there may be a 20-day clock to object.

    • Structure your plan to fully pay critical co-signed debts when possible. You can separately classify co-signed unsecured claims to protect a family member or friend, subject to Chapter 13 rules.

    • Remember: the co-debtor stay ends when your case is dismissed, converted, or completed—at that point, creditors can resume collection from the co-debtor for any unpaid amounts.

    How We Help

    We guide clients through:

    • Determining whether a debt is consumer vs. business (and whether the stay applies)

    • Stopping collection aimed at co-signers and addressing violations

    • Designing Chapter 13 plans that manage co-signed debts wisely (including separate classifications)

    • Litigating motions to lift the co-debtor stay and protecting co-signers from unnecessary exposure

    Worried about a co-signer being sued or garnished during your Chapter 13?
    📞 Contact Ginsburg Law Group for a free, confidential consultation. We’ll explain your options, protect your loved one, and build a plan that works.

    This article is for general information only and isn’t legal advice. Laws and outcomes vary by jurisdiction.