Are you facing the daunting prospect of bankruptcy, but worried about how it might affect your co-signers? Bankruptcy can be a complex and stressful process, especially when considering the potential impact on those who have co-signed loans or debts with you. However, there’s a solution that provides significant protection not just for you, but also for your co-signers: Chapter 13 bankruptcy.

While Chapter 7 bankruptcy offers valuable protection through the automatic stay, Chapter 13 takes it a step further by extending this protection to include co-signers. Let’s take a closer look at how Chapter 13 bankruptcy can safeguard the interests of both primary debtors and their co-signers:

1. The Automatic Stay: Much like Chapter 7, Chapter 13 initiates an automatic stay upon filing. This legal provision halts creditor actions such as foreclosure, wage garnishment, and debt collection efforts. However, what sets Chapter 13 apart is that this stay also extends to cover co-signers. This means that not only are you protected from creditor harassment and legal actions, but your co-signers are as well.
2. Co-Signer Stay: Chapter 13 introduces a concept known as the “co-signer stay.” This provision prevents creditors from pursuing co-signers for repayment of consumer debts included in the bankruptcy filing. As a result, your co-signers are shielded from potential financial repercussions arising from your bankruptcy proceedings, providing them with much-needed relief and protection.
3. Debt Repayment Plan: Unlike Chapter 7, which typically involves the liquidation of assets to repay debts, Chapter 13 allows debtors to restructure their debts through a court-approved repayment plan. This plan, which typically spans three to five years, prioritizes the repayment of secured debts, such as mortgages and car loans, while also addressing unsecured debts like credit card balances and medical bills. By entering into a Chapter 13 repayment plan, you can alleviate the financial burden on your co-signers, as the plan aims to repay debts over time in a manageable manner.
4. Co-Signer Liability: By adhering to the terms of the repayment plan and fulfilling your obligations under the bankruptcy process, you can protect your co-signers from potential legal actions by creditors seeking repayment. This offers peace of mind to both you and your co-signers, knowing that their financial well-being is safeguarded throughout the bankruptcy process.
5. Preserving Co-Signer Assets: In addition to protecting co-signers from creditor actions, Chapter 13 also safeguards their assets from being liquidated to satisfy debts. This ensures that your co-signers retain ownership of their property and assets, providing them with greater financial security and stability during the bankruptcy process.

In summary, Chapter 13 bankruptcy offers a comprehensive solution for individuals seeking debt relief while also protecting their co-signers and their assets. By initiating an automatic stay and implementing a structured repayment plan, Chapter 13 enables debtors to address their financial challenges while minimizing the impact on their co-signers.

If you’re considering bankruptcy and have co-signers on your debts, Chapter 13 may offer the protection and relief you need while preserving the financial well-being of your co-signers. It’s essential to consult with a qualified bankruptcy attorney to explore your options fully and determine the best course of action for your financial situation. With the right guidance and support, you can navigate Chapter 13 bankruptcy with confidence and take steps towards a brighter financial future for both yourself and your co-signers.

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.