Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.
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First, a student loan generally cannot be discharged in bankruptcy, so even if there is a co-signor, the person for whom the loan was made will more than likely still have liability for the loan post-bankruptcy.
Now there are exceptions to this general rule, and there are ways for a debtor to show that the student loan is producing an undue financial hardship, at which point the bankruptcy court may agree to discharge the debt, but this is under very limited circumstances.
In any event, during the course of the bankruptcy proceeding, there is an automatic stay placed on creditors and they cannot make any contact with or try to collect from the debtor until that stay is lifted. During that time, a creditor could pursue a co-signor for the debt, as the stay does not apply to the debt itself, only to collection from the debtor in bankruptcy.
So, during the course of the bankruptcy, because the stay is in place, the creditor is unable to collect from the bankruptcy debtor, allowing them to try and collect from the co-signor.
Now, depending on what happens in the bankruptcy, if the student loan is not discharged, then the debtor would still be responsible for it. If, however, in the off chance that it is discharged in the bankruptcy, the co-signor would be solely responsible.
So, in short, yes, as a result of the stay placed on collection of the debtor in a bankruptcy, the lender can try to collect from the co-signor, even if they were initially the secondary debtor, because the primary debtor has a stay on all collection.
I wish I had better news for you, but as a co-signor, once the other debtor becomes uncollectable, even temporarily, the co-signor is liable for the debt.
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Yes, chapter 7 is very different than, say, a chapter 13, during which the bankruptcy proceeding is a years long process where the debtor is actually paying back a portion of the loan, which may have been why they were not collecting, because she was still paying a portion of the loan.
Ultimately, the stay in a chapter 7 preventing collection only applies to the debtor in the bankruptcy.