Smith v. Capital One Bank (USA), N.A.

Co-debtor stay prevented from becoming an automatic stay for a non-filing spouse.

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Case Type:
Case Status:
16-1422 & 16-1423 (7th Circuit, Dec 22,2016) Published

The co-debtor stay shields a non-debtor only if the debtor is liable on a consumer debt along with the non-debtor and a consumer debt does not include a debt for which the debtor is not personally liable but that may be satisfied from the debtor’s interest in marital property.

Procedural context:

Debtor commenced an adversary proceeding against Capital One and its attorneys listing 6 causes of action including violation of the co-debtor stay. The bankruptcy court ruled in debtor’s favor on summary judgment holding that it was subject to the co-debtor stay and Capital One filed an interlocutory appeal to the district court which reversed and remanded on the ground that the debt was not a consumer debt of the debtor. Since the reversal foreclosed all of debtor’s claims, the district court’s judgment was deemed final for appeal purposes. A ruling on summary judgment is reviewed de novo and the 7th Circuit affirmed.


After debtor’s chapter 13 plan had been confirmed but prior to her completing the payments thereunder, Capital One sued debtor’s husband over amounts he incurred for family expenses using a credit card he had obtained in his name. The debtor was not a party to the lawsuit. Capital One obtained judgment in August 2014 but never attempted to collect. Debtor initiated the adversary proceeding in February 2015 and argued that since Capital One could collect the judgment from marital property under Wisconsin law, it made her liable for the debt, too. Neither the district court nor the 7th Circuit accepted that argument since debtor was not a party to the suit and the automatic stay would prevent Capital One from collecting from marital property. As a result, both courts held debtor was not liable for the debt.

Flaum, Kane, Magnus-Stinson (Flaum)

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