11 U.S.C. Section 1201 -- Co-Debtor Stay in Chapter 12

What Is Section 1201?

Section 1201 of Title 11 of the United States Code (Stay of Action Against Codebtor (Chapter 12)) is a foundational provision of the Bankruptcy Code. It provides an automatic stay protecting co-debtors in Chapter 12 family farmer and family fisherman cases. This prevents creditors from pursuing co-signers while the debtor is in Chapter 12.

Key Provisions of Section 1201

Section 1201 protects co-debtors:

• A creditor may not act or commence or continue any civil action to collect a consumer debt from any individual that is liable on such debt with the debtor
• The stay applies to debts owed by individuals, not business debts
• Relief from the co-debtor stay can be granted for cause, if the co-debtor received the loan consideration, or if the creditor's interest would be irreparably harmed

How This Affects You

The Chapter 12 co-debtor stay parallels the Chapter 13 co-debtor stay (Section 1301):

• It protects family members who co-signed farm loans or equipment financing
• Without this protection, creditors could circumvent the debtor's reorganization by collecting from the co-signer
• The stay lasts until the case is closed, dismissed, or converted

Related Bankruptcy Code Sections

Section 1201 works in conjunction with several other provisions of the Bankruptcy Code:

• Section 1225 -- Chapter 12 plan confirmation
• Co-Signer Impact -- General guide to co-debtor issues

Understanding how these sections interact is critical for anyone navigating the bankruptcy process, whether as a debtor, creditor, or attorney.