What will happen if I co-signed for a private student loan and this person then filed chapter 13? - Bankruptcy Law Questions and Answers- LawQA.com

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What will happen if I co-signed for a private student loan and this person then filed chapter 13?

I co-signed for a private student loan, this person then filed chapter 13. Four years later and a hell of a lot of interest they turned the loan over to me. Why wait so long no one will answer that question.

Portland Bankruptcy Law Group
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When a person files a Chapter 13 case, there is a "co-debtor stay" that goes into effect on the date of filing. That stay is a court order that forbids creditors from pursuing collection activity against people who have co-signed on any of the debtor's obligations. So, the student loan company was forbidden from contacting you while the person was in bankruptcy. But, after the bankruptcy is finished they are free to pursue you for the debt. And, student loans are not dischargeable in bankruptcy so the debtor remains liable as well.

Answer Applies to: Oregon
Replied: 8/4/2015

Answer By Joseph Schramm

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Unfortunately, when a person cosigns for a loan they are obligated to pay for the loan if the primary borrower defaults on their obligation. Perhaps the reason it took so long for the the loan company to approach you is that the debtor was in Chapter 13 and ultimately failed to pay off his debts or, perhaps he paid off the required amount according to the reorganization plan and the loan company is pursuing you for the difference. If that is the case, you might have a defense you can raise. You might also have a defense you can raise regarding the statute of limitations if they have waited four years to pursue you. You should review the contract with an attorney who does debt collection work and speak with the person who declared bankruptcy to what transpired.

Answer Applies to: Pennsylvania
Replied: 8/3/2015

Answer By William Rhymer
Rhymer Law Firm
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If you cosigned the loan, then you are jointly liable and the creditor can decide whether to go after one or both of you. The student loan creditor must leave the filer alone while the case is pending. If the student loan is not paid in full through the Chapter 13 case, the creditor can try to collect from the filer as soon as the Chapter 13 is over. The creditor can go after you at anytime unless the filer had a special plan provision for paying the loan under the Chapter 13 plan.

Answer Applies to: Georgia
Replied: 8/3/2015

Answer By Cate Eranthe
Eranthe Law Firm
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When the person filed the chapter 13 bankruptcy there was a stay against collections that went into effect. This stay included you. As a co-signer you should have been notified of the bankruptcy. At that point you could have taken over the payments if you wished.

Answer Applies to: California
Replied: 8/3/2015

Answer By Ronald K. Nims

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It's called the "codebtor stay". Creditors can't collect from or even contact cosigners while the debtor is in Chapter 13.

Answer Applies to: Ohio
Replied: 8/3/2015

Answer By Dorothy G Bunce
A Fresh Start
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During a Chapter 13 bankruptcy, creditors are obligated by a bankruptcy stay or injunction that prevents them from contacting the debtor and a co-debtor. Unfortunately, most Chapter 13 debtors are not able to afford to pay down their student loans during the course of their case. Why did YOU not ask this question when your co-signer filed Chapter 13. No one has the obligation to volunteer information to you about your legal rights and the lender was barred by injunction from doing so.

Answer Applies to: Nevada
Replied: 8/3/2015

Answer By Janet Lawson
Janet A. Lawson Bankruptcy Attorney
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While the chapter 13 case is pending there is a "co-debtor stay", meaning they can't come after you during this time period. The debtor who filed chapter 13 is still liable for the debt unless they filed a separate action to discharge it, (rarely granted).

Answer Applies to: California
Replied: 8/3/2015

Charles Schneider, P.C.
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You will still owe the loan minus the payments the student loan creditor receives from the chapter13.

Answer Applies to: Michigan
Replied: 8/3/2015

Answer By Joshua Cohen
Law Office of Joshua R.I. Cohen
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The loan defaulted when BK was filed. They are under no obligation to chase you as soon as they can. You, however, are obliged to make payments if the other signet is not making payments. You should consult a student loan lawyer to learn your rights and strategies.

Answer Applies to: Connecticut
Replied: 8/3/2015


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I can only speculate. They were probably working with the principal signer. Also, in a Chapter 13 there is a stay of collection action against a co-debtor so long as the debtor's Plan provides for 100% repayment of the debt. Perhaps his Ch. 13 was dismissed, or perhaps he had to modify his Plan so that the Student Loan was no longer scheduled for full repayment. Since your co-signature was a kind of guaranty, the bank may have been following the laws of guaranty, which require strong efforts to collect from the principal debtor before the creditor can call on the guaranty. You might be able to negotiate some arrangement whereby the bank waives some or all of the needless interest. You might also ask the bank and your friend what were the circumstances that led to the 4-year delay.

Answer Applies to: Wisconsin
Replied: 8/3/2015

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