How does a Chapter 13 Bankruptcy effect a cosigner?

If you are a cosigner on the debt, then you and the other debtor are technically joint and severally liable for that debt.  One common form of debt that’s jointly owned is that for a vehicle.  If somebody else filed a Chapter 13 bankruptcy on it vehicle that you cosign, you may be protected under that persons Chapter 13 bankruptcy provided they pay the debt in full 100%.  If, on the other hand, they decide to pay less than 100%, then the creditor has the ability to bring a Motion to Modify the Stay and come after you, the non-filing co-debtor for the difference.

What we usually see in these types of cases is the debtor filing a 100% Chapter 13 to protect that co-debtor.  But please keep in mind to be protected under the 100% co-debtor stay under Chapter 13, the debtor must continue to make payments pursuant to the plan.  If at any time they fall behind, the creditor can bring a Motion to Modify the Automatic Stay or the trustee can bring a Motion to Dismiss the Chapter 13.  In either case, that creditor is free to pursue either you or the original debtor or co-debtor in the case.  So keep in mind just because you are under the protection of the bankruptcy court, you are only protected for as long as that debtor is making payments back at 100%.


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