If you file for bankruptcy, your creditor can’t collect from your co-debtors unless you get their written consent. This means that you can avoid the risk of being coerced into making payments. Resource : https://www.scura.com/blog/leaving-your-co-debtor-as-the-sole-debtor
What happens when a person declares bankruptcy?
Co-debtors are individuals who have a debt in your name, either individually or as a business partner. These individuals may include family members, friends, business partners, and creditors. They often sign documents at the request of the debtor.
A co-debtor’s obligation to pay your debt does not change. However, they may be held in contempt of court if you don’t give them your written consent. In addition, if you don’t pay your co-debtors, they may be able to enforce their rights against you.
Co-debtors are important because they help to minimize the bankruptcy filer’s financial burden. When you’re filing for bankruptcy, it’s a good idea to talk with your co-debtors and ask them for their written consent before you file. You may want to discuss a repayment plan with them, and you can even accept voluntary payments from them.
The Bankruptcy Court may also order you to pay money damages to your co-debtors. However, if you refuse to do this, they can apply to the Court for a stay. During a Chapter 13 bankruptcy, this type of protection is called “Co-Debtor Stay.”
The co-debtor stay is a key concept in consumer bankruptcy involving auto finance. It prevents your lender from repossessing your vehicle or collecting against your property. Often, you may be able to obtain a payment plan that pays your debt in full, leaving you free to continue driving your vehicle.