Can co-signers be protected?

If you file a straight bankruptcy, or Chapter 7, then a creditor may proceed against your co-signer, co-debtor, co-maker or guarantor according to the terms of the debt agreement.

If, however, you seek relief to repay your debts under Chapter 13, an individual co-debtor is protected, to the extent the plan proposes to repay the debt, and if the following conditions are met:

•     The debt is a consumer debt;

•     The debt is not a debt incurred in the ordinary course of a debtor's business;

•     The co-debtor did not benefit from the proceeds of the debt.

As long as the Chapter 13 is pending, that is, it has not been closed, dismissed or converted to a Chapter 7, then the creditor cannot act to collect all or any part of the obligation, including the filing of a lawsuit, without first getting permission from the Bankruptcy Court.

This permission will not ordinarily be granted if the Debtor's Play of repayment has been approved and the Debtor is making the required payments under the plan.

The purpose of this provision of Chapter 13 is to allow a debtor the opportunity to repay the debt without permitting the creditor to bring undue pressure on the debtor by approaching a co-debtor for payment.

If you do not want a co-debtor effected by your bankruptcy, Chapter 13 may be the solution.

Each person's situation is different. What applies to one person may not apply to another. To determine bankruptcy options as they apply to you, an attorney competent in bankruptcy matters should be consulted.

If you wish to have a confidential appointment to discuss your bankruptcy options with an attorney in the Law Offices of John M. Miller, you may do so by calling (515) 225-3333 between the hours of 8 a.m. to 5 p.m. (Central Time), Monday through Friday.