A Chapter 7 bankruptcy discharges most unsecured debts, like credit cards, and allows you to keep secured debts like car loans and home mortgages if you agree to repay the loans. If you have a cosigner on your debts, your cosigner will still be responsible for the debt, despite your bankruptcy filing. When you (the debtor) files for bankruptcy, an automatic stay goes into effect and prohibits creditors from taking any action to collect your debts.

And in a Chapter 13 bankruptcy, there is also a codebtor stay—which means the automatic stay of collection efforts also applies to any codebtors, including cosigners. While the codebtor stay is in place, creditors cannot collect against a cosigner. The codebtor stay continues until the bankruptcy case is over, unless the court lifts the stay at the creditor's request.

In South Carolina, Chapter 7 bankruptcy allows individuals to discharge most unsecured debts, such as credit card debts, while potentially retaining secured debts like car loans and home mortgages by agreeing to continue making payments. However, if there is a cosigner on any of the debts, the cosigner remains liable for the debt even after the debtor's discharge. The filing of a Chapter 7 bankruptcy triggers an automatic stay, which prevents creditors from pursuing debt collection against the debtor. In contrast, Chapter 13 bankruptcy not only provides an automatic stay for the debtor but also extends this protection to cosigners through the codebtor stay. This means creditors are barred from collecting from cosigners for the duration of the Chapter 13 bankruptcy case, unless the court decides to lift the stay upon a creditor's request. Both types of bankruptcy are governed by federal law, but local rules and procedures in South Carolina may affect the bankruptcy process.