Co-Signors & the Automatic Stay:5 Things to Be Aware Of

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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.

About the Author
George Haines

In the late 2000s, Southern Nevada was hit especially hard by the last Great Recession. The real estate market crashed, unemployment rates soared, there were a record number of bankruptcy filings and wages were stagnate. But, we made it through it and we learned how to survive in these types of downturns. Are we going to see something similar to the Great Recession in the coming months or years due to the Covid Pandemic?…… it’s tough to say, but if we do, we’ll get through it. In order to save homes, vehicles, feed families and pay living expenses, many may need to consider bankruptcy or other loss mitigation options. However, just like we did after the Great Recession, we will rebound and grow stronger.

George Haines

Owner and Managing Attorney

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