The Co-Debtor Stay is only applicable in a Chapter 13 bankruptcy and only to consumer debts.¬¨‚Ä† It is not applicable in a Chapter 7 bankruptcy.
It’s function is to¬¨‚Ä† stop collection activities against persons who are not filing bankruptcy but who also owe on one or more of the debts that the filing person may be liable.¬¨‚Ä† This protects the co-debtor from immediately being pursued because the filing person is now protected by the bankruptcy stay and can no longer be pursued.¬¨‚Ä†¬¨‚Ä†¬¨‚Ä† A co-debtor is someone who agrees to be liable on the debt with the debtor, the person filing bankruptcy.¬¨‚Ä† It does not matter if they sign as “secondary” or “primary” or as “guarnator” or as a “surety.”¬¨‚Ä† All of those persons are co-debtors.
To pursue the co-debtor the creditor must seek relief from the stay by motion filed with the Court and must demonstrate sufficient reasons why the co-debtor stay should be modified.¬¨‚Ä† If they do not so file a motion or if the motion is not granted and they attempt to collect the debt from the co-debtor they are in contempt of court order.
The purpose of Co-Debtor Stay is to delay collection actions against a co-debtor for consumer debts during the Chapter 13 bankruptcy¬¨‚Ä† case and remains in place until the bankruptcy case has been closed, dismissed, or converted to Chapter 7 or the stay is lifted.
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