11 USC 1301: Co-Debtor Stay in Chapter 13 Bankruptcy

The co-debtor stay in Chapter 13 is an automatic protection under Section 1301 of the Bankruptcy Code that stops creditors from collecting a consumer debt from anyone who co-signed, co-borrowed, or guaranteed the loan alongside the person who filed. It takes effect the moment the Chapter 13 petition is filed, requires no separate motion, and lasts for the life of the case unless a creditor persuades the court to lift it.¹

What the Stay Blocks

Once the petition is filed, a creditor cannot sue the co-signer, call them, send collection letters, or take any other collection action on a qualifying debt. The protection reaches anyone individually liable on the same obligation, including people who pledged collateral to secure it.¹

This is a separate shield from the general automatic stay under Section 362, which protects only the debtor and the debtor’s property. Without Section 1301, a creditor blocked from collecting from the filer could simply turn to the co-signer for the full balance, defeating the point of the repayment plan.

Which Co-Signed Debts Qualify

Only consumer debts are covered. The Bankruptcy Code defines a consumer debt as one taken on primarily for personal, family, or household purposes.² A co-signed car loan for the family vehicle, a jointly held household credit card, or a personal loan with a guarantor all fall inside the definition.

Business debts do not qualify, even when an individual personally guaranteed them. Neither do tax obligations or other debts that are not primarily personal. When a debt straddles personal and business use, courts look at the primary purpose at the time the debt was incurred, and “primarily” means the personal purpose has to outweigh the business one.

The stay also protects only individual co-debtors. A corporation or LLC that co-signed gets no shield from Section 1301.

When It Starts and When It Ends

The stay is automatic on filing. No hearing, no order, no notice from the court is required before creditors must stop.¹

It ends when the Chapter 13 case is closed, dismissed, or converted to Chapter 7 or Chapter 11.¹ Conversion is the scenario a co-signer should watch most carefully. Neither Chapter 7 nor Chapter 11 has a co-debtor stay, so a case that converts leaves the co-signer immediately exposed to collection for the full amount.

Debts That Fall Outside the Stay From Day One

Section 1301 removes one situation entirely from the stay, without any court motion: obligations the co-debtor took on in the ordinary course of their own business.¹ A business partner who co-signed a loan to fund a joint venture is not protected. The provision exists for family and friends who helped someone qualify for a personal loan, not for commercial arrangements.

There is also a narrow carve-out for negotiable instruments. While the stay is in effect, a creditor may still present a check or promissory note for payment and give formal notice if it is dishonored.¹ That preserves the creditor’s rights under commercial law without opening the door to broader collection.

How a Creditor Can Ask the Court to Lift It

When no built-in exception applies, a creditor who wants to collect from the co-signer has to file a motion. Subsection (c) of Section 1301 lists three grounds, and the court is required to grant relief when any one is shown.¹

The co-debtor received the benefit of the transaction. If the co-signer was the one who actually got the money or goods and the filer was really just accommodating them, the stay comes off. The test looks at who benefited, not whose name appears first on the paperwork.
The debtor’s Chapter 13 plan does not propose to pay the claim. If the plan pays only part of a co-signed debt, the creditor can pursue the co-signer for the unpaid portion. A plan proposing to pay 60% of a co-signed loan leaves the remaining 40% open to collection from the co-signer.
Continuing the stay would irreparably harm the creditor. This covers situations such as rapidly depreciating collateral or a statute of limitations that would run during the case.

The 20-Day Rule on Unpaid Claims

When the creditor’s motion is based on the “plan doesn’t pay” ground, a special timeline runs. The stay terminates automatically 20 days after the motion is filed unless the debtor or co-debtor files and serves a written objection.¹ Missing that window means losing the protection without ever getting a hearing.

Motions based on the co-debtor receiving the benefit or on irreparable harm work differently. Those go to a hearing, and there is no automatic termination if no one objects.

What Happens After the Case Ends

A Chapter 13 discharge wipes out the debtor’s personal liability. It does nothing for the co-signer. Section 524(e) is explicit that discharging one person’s debt does not affect anyone else’s liability on the same debt.³

If the plan paid the co-signed debt in full, the debt is satisfied and the co-signer owes nothing further. If the plan paid only a percentage, the co-signer stays on the hook for the remainder. Once the case closes, the stay lifts, and the creditor can pursue that balance through normal collection channels.

If the Filer Uses Chapter 7 Instead

Section 1301 lives in Chapter 13. It does not apply to Chapter 7 or Chapter 11. If the debtor files Chapter 7, creditors face no restriction on collecting from co-signers and guarantors from the day the petition is filed. The Section 362 automatic stay protects the filer, not the co-signer.

For someone with co-signed consumer debts who wants to shield the co-signer, that difference is one of the concrete reasons to choose Chapter 13 over Chapter 7.⁴

1
Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor
2
Office of the Law Revision Counsel. 11 USC 101 – Definitions
3
Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge
4
United States Courts. Chapter 13 Bankruptcy Basics