Once a debtor in Maryland files a chapter 13 cases this triggers what is known as the automatic stay. The automatic stay prohibits.
In addition to protecting the debtor, a chapter 13 has another powerful tool that goes into effect once the case if filed. This is known as the codebtor Stay. This stay prohibits any attempt to collect all or part of a consume debt of the debtor from any codebtor.
It is important that to note that this protection includes codebtors who are liable on the debt as well as Codebtors who contributed an asset to secure the debt such as a car or home.
In the real world this is how this works. Let’s debtor needs a loan but because of poor credit collateral is required to obtain the loan. A common example familiar to most folks is a car title loan. Our debtor goes to a family member who agrees to put up their car as collateral for the loan with the debtor is set to make the payments.
Assuming Debtor is eligible for chapter 13 which means that her or she has less than $336,900.00 in unsecured debt such as credit cards and less than $,010,650.00 dollars of non-contingent, liquidate, secured debt such as mortgages. Then a chapter 13 filing would provide protection to the debtor and Codebtor against collection efforts on the title loan. The title loan company would be prohibited from taking any actions that were aimed at collecting on the loan against both the debtor and the codebtor.
As you can imagine, this is a significant relief for the family member in our scenario because without the codebtor stay they would be faced with collection calls, law suits, garnishments and potential repossession.
The availability of codebtor stay in chapter 13 is a helpful tool that allows the debtor to reorganize without pressure, directly or indirectly, from the creditors. It goes without saying as well that it is helpful to the debtor that family member or friends who are willing to co-sign debts or put up collateral are not hounded by creditors while the chapter 13 case is pending.
As always please consult a knowledgeable bankruptcy lawyer in your area to discuss the specifics of your case.