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The co-debtor stay under 11 U.S.C. Section 1301 is a unique protection available only in Chapter 13 bankruptcy. When you file Chapter 13, the automatic stay protection in bankruptcy protects you - but Section 1301 goes further by also protecting co-signers, co-obligors, and guarantors on your consumer debts from collection activity during your case.
This site will explain how the co-debtor stay works, who it protects, and its limitations. We will cover the three grounds under Section 1301(c) on which a creditor can seek relief from the co-debtor stay, the requirement that the protected debt be a consumer debt (not a business debt), and how courts distinguish between consumer and business obligations.
If you have a parent who co-signed a car loan, a spouse who is jointly liable on a credit card, or a friend who guaranteed a personal loan, the co-debtor stay may be one of the most important reasons to choose Chapter 13 over Chapter 7. We will explain when it applies and when it does not.
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Frequently Asked Questions
What is the codebtor stay?
The codebtor stay under 11 U.S.C. Section 1301 protects non-debtor individuals who are co-liable on consumer debts with the Chapter 13 debtor. It prevents creditors from collecting from cosigners, co-borrowers, or guarantors while the Chapter 13 case is active.
Does the codebtor stay protect my cosigner?
Yes, but only in Chapter 13 and only for consumer debts. The stay prevents creditors from pursuing your cosigner for the duration of your Chapter 13 case. If you propose to pay the co-signed debt in full through your plan, the protection continues until discharge.
How long does the codebtor stay last?
The codebtor stay lasts for the duration of the Chapter 13 case - typically 3 to 5 years. It ends when the case is closed, dismissed, converted to Chapter 7, or if the court grants relief from the codebtor stay upon a creditor motion showing irreparable harm.
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Explore Codebtor Stay Topics
Dive deeper into specific aspects:
- Who Does the Codebtor Stay Protect?
- How the Codebtor Stay Works in Chapter 13
- How to Protect Your Cosigner
- Cosigner Protection Strategies
- When the Codebtor Stay Can Be Lifted
- Creditor Motion for Relief - Section 1301(c)
- Codebtor Protection: Chapter 7 vs. Chapter 13
- Codebtor Stay and Community Property States
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