What Is a Codebtor in Bankruptcy?

A codebtor is someone who must pay off a debt owed by the debtor (the person who files for bankruptcy) if the debtor fails to do so. A Chapter 7 bankruptcy will not discharge (wipe out) a codebtor’s responsibility to pay the debt. The codebtor will remain liable and subject to collection efforts after the bankruptcy. By contrast, in most cases, a codebtor will not be responsible for paying the debt while the debtor pays into a three- to five-year repayment plan in a Chapter 13 bankruptcy. (To learn more, read Will Your Cosigner Be Liable for Debt if You File for Bankruptcy?)

When you file for bankruptcy, you must complete a packet of official forms and list codebtors on form Schedule H: Your Codebtors (individuals) of the bankruptcy petition. Here are examples of different types of codebtors.

Someone cosigns an account for you. If you don’t have enough income or a high enough credit score to make a purchase on credit—such as a car—another person, called a cosigner, might agree to help you open the account. Because a cosigner is also responsible for the debt, you’ll list that person on Schedule H.

Your non-filing spouse owes a debt along with you. When spouses apply for credit together—such as to take out a mortgage or open a credit card—both spouses become equally responsible for paying off the debt. If only one spouse files for bankruptcy, but the spouses are both responsible for a mutual debt, the debtor (the filing spouse) must list the non-filing spouse on Schedule H of the bankruptcy petition.

You and your spouse lived in a community property state during the last eight years. If you incur debt while married and residing in a community property state, each of you will e responsible for the obligation. You’ll complete a special section addressing this issue on Schedule H. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, and Wisconsin.

Someone personally guaranteed a business debt. Many companies won’t give credit to a new or small business unless an individual agrees to be responsible—or “personally guarantee”—the debt. This requirement protects the creditor if the company can’t pay or shuts down. In a business bankruptcy, the debtor must list all individuals or other companies that agreed to be jointly responsible for the business debt on Schedule H: Your Codebtors (non-individuals).

(If you’d like information about completing the form, read Completing Bankruptcy's Schedule H: Your Codebtors.)