When two or more people are liable on the same debt, they are called co-debtors and there are certain rights and obligations that pertain to co-debtors in bankruptcy. The strongest of these in a bankruptcy case is in Chapter 13, where co-debtors of consumer debts are protected by the co-debtor stay when their other debtor, usually a spouse, files a Chapter 13 case. This co-debtor stay can be very effective in planning a bankruptcy case, especially if there’s going to be a foreclosure or some other type of enforcement action pending.

Frequently misunderstood is the fact that just because one person files bankruptcy to get protection from a creditor, if there’s a co-debtor on the obligation who hasn’t filed bankruptcy (with the special chapter 13 exception), that creditor can still seize that other person’s property or wages.

This becomes a special problem in divorce cases, where one spouse will agree to pay credit card debts or a mortgage for which the other spouse is also responsible. It’s important to remember that this agreement between the spouses is not binding on the creditor. As a result, if the paying spouse files bankruptcy the creditor can still pursue the spouse who thought that they were in the clear under the divorce or separation agreement.