If a person has a cosigner on a non-business or consumer debt and they wish to file for bankruptcy protection, they may be able to also protect that cosigner with a codebtor stay under chapter 13. In this article, readers can learn more about protecting cosigners in chapter 13 in Lawrence, KS.
The Definition of a Cosigner
Cosigners are other people who can be held legally liable for a person’s loan debt; they are just as responsible for repayment as a primary borrower is. If the loan goes into default, the lender can pursue both the primary borrower and the cosigner, because when they review loan applications, they usually require cosigners if they think that the original borrower does not have sufficient assets for approval on their own.
Cosigners and Bankruptcy
The minute a person hires Business Name and files for bankruptcy, an automatic stay prevents a creditor from attempting further collection attempts. When the case is completed and the debtor receives a discharge, their personal liability for discharged debts is illuminated; however, this does not eliminate a cosigner’s liability for the debt. If a person wishes to protect cosigners during a bankruptcy filing, they can do it by requesting chapter 13 and fulfilling the repayment plan. Unlike chapter 7, cosigners are somewhat protected by the codebtor stay which will be discussed below.
The Codebtor Stay
In certain bankruptcy cases, cosigners are safeguarded from creditor actions because of a codebtor’s stay. Creditors are required to abide by the stay unless a loan’s cosigner acquired liability for a debt during the course of business, or the bankruptcy case is closed, dismissed or converted to chapter 11 or chapter 7.
This fact means that creditors cannot pursue cosigners as long as the stay remains in effect. Basically, chapter 13 in Lawrence, KS allows debtors to keep cosigners safe by paying debts off gradually. However, the stay does have limitations, and creditors can ask the court to lift a codebtor stay if that person actually received benefit from the loan, or if the debt isn’t included in the repayment plan. If the creditor’s interests would be irretrievably harmed by the stay remaining in effect, the creditor may be able to get it lifted.
