CAN MY CO-SIGNERS BE PROTECTED?

If you file a straight bankruptcy, a Chapter 7, then the creditor can proceed not only against your cosigner, but also against any other co-debtor, co-maker, or guarantor according to the terms of the debt agreement.

If, however, you seek relief to repay your debts under Chapter 13, an individual co-debtor is protected, to the extent the plan proposes to repay the debt, and if the following conditions are met:

• the debt is a consumer debt;
  
• the debt is not a debt incurred in the ordinary course of debtor's business;
  
• the co-debtor did not benefit from the proceeds of the debt.
  

As long as the Chapter 13 is pending, that is it has not been closed, dismissed or converted to Chapter 7, then the creditor cannot act to collect all or any part of the obligation, including the filing of a lawsuit, without first getting permission from the Bankruptcy Court.

This permission will not ordinarily be granted if the Debtor's plan of repayment has been approved and the Debtor is making the required payments under the plan.

The purpose of this provision of Chapter 13 is to allow a debtor the opportunity to repay the debt without permitting the creditor to bring undue pressure on the debtor by approaching a co-debtor for repayment.

If you do not want a co-debtor involved, there may be a solution to this problem.