The automatic stay gives debtors a very special protection from creditors during the course of the bankruptcy process. But what about co-signors? Do they get the same protection from creditors?
Here are 5 things to know about the automatic stay if you are a co-signor:
1. In a Chapter 7 bankruptcy filing, co-signors DO NOT get the protection of the automatic stay. Why? Because Chapter 7 discharges debts and gives the debtor a clean slate.
2. In a Chapter 13 bankruptcy filing, co-signors DO GET the protection of the automatic stay during the bankruptcy case. However, if the debtor is unable to complete the case and does not pay off its debts, then the co-signor loses the protection of the automatic stay and is responsible for the debtor’s debts.
3. If a Chapter 13 case converts to a Chapter 7 case, then the automatic stay protection automatically expires for a co-signor.
4. A bankruptcy court can, in some circumstances, decide to limit the protection of the automatic stay to the co-signor in a Chapter 13 bankruptcy. This would only occur if the bankruptcy judge decided that to do otherwise would cause “irreparable harm” to the creditors.
For a free Las Vegas bankruptcy consultation, contact the offices of Freedom Law Firm at 702-919-6380.