Co-Signers and Bankruptcy: How the Co Debtor Stay Works


so what happens to Co debtors when
someone files for bankruptcy are they protected watch our video and find out so this is a question that we get a lot
when folks come in to file bankruptcy because they need to file bankruptcy but
they don’t want to harm a co debtor on one of their accounts which of course we
understand that so what happens well when you file for bankruptcy you not
only have the automatic stay apply to yourself but you’re going to have
something called a code enter stay that will apply to your co debtors now this
day doesn’t apply to a co debtor that is a business and it doesn’t apply to a
debt that is a business debt or non consumer debt and one thing to keep in
mind is remember taxes are considered non consumer debts so if you file for
bankruptcy and even if you are restructuring your tax debt in a chapter
13 if your spouse doesn’t file with you then could still be contacted by the
taxing authorities in regards to that debt because that’s considered non
consumer it really just depends on what district you live in or what not but at
least here in the Northern District of Georgia that’s what we see in that case
we always tell clients if they’re not going to file together and there’s tax
debt the other person needs to set up some kind of a small repayment plan at
least with the taxing authority to keep them off their back even though you can
restructure through your plan so it’s something you want to make sure you talk
with your attorney but it refers to all other debts and when you file for
bankruptcy it is going to apply the code error stay now again it’s only
temporarily so for instance if you file a chapter 7 bankruptcy but you have a
cosigner on your vehicle even though while you’re in the bankruptcy if you
decided you were gonna let the car go you’re not going to pay for it it would
temporarily stop them from collecting against the co debtor but when you come
out of the bankruptcy they’re going to go after the code editor for that for
that amount because the stay will be going so you need to make sure you
understand just because you’re getting rid of your debt it’s not going to
protect the other person and when once that code interstate goes away if the
debt has not been paid then they can go after that person now the most most of
the time the way this comes up is someone files a chapter 13 bankruptcy
and there’s a car this is usually the where we’ll see a lot of attorneys make
steaks there was a car and there’s a code error but the attorney crams down
the value crams down interest rate on a vehicle but there’s a code error so the
person goes through their whole bankruptcy and they think everything is
fine because because of the code error stay they’re not they’re not contacting
the the co debtor but then when they get out they don’t get the title and the the
the company is going after the code error for that balance that was crammed
down so remember if you are thinking about trying to cram down a vehicle or
any other kind of asset in a bankruptcy if your if your code editor isn’t filing
as well or if they’ve not discharged they’re dead in another bankruptcy then
it’s not gonna work so just keep that in mind but back to the code error stay yes
when you file a bankruptcy it will protect the code enter at least
momentarily from collections but if the debt is not repaid eventually the
creditor will be able to go after the co debtor if you have any other questions
about the stay coded or stay or file a bankruptcy in general feel free to
contact us our information is below

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