What do I do if I am being sued for money owed on a loan that my parents did for a business they own?

You should consult a skilled bankruptcy lawyer WITHOUT DELAY. Ch. 13 does not protect guarantors unless the Plan calls for 100% repayment on the guaranteed debt, But the creditor must obtain Relief from Stay before they can seek to collect from you. Unless the amount of money involved is trivial, you need the advice of a lawyer who knows his/her business right away. Our firm does this kind of work; so do many others. Good Luck.

First item, usually co-debtors (that's what you're called in bankruptcy court) usually have their debts paid 100% in Chapter 13 (unless the Chapter 13 payments are tiny). If your parents lawyer didn't inform them of this option, you have a malpractice lawsuit against the lawyer and your parents should file a ethics complaint because he/she has no business taking bankruptcy cases if he/she isn't familiar which basic bankruptcy law. Second item, are your parents still in Chapter 13? Creditors aren't allowed to sue co-debtors while the Chapter 13 is still going on (they take 3 to 5 years). Third item, If you received the summons on February 17th and a default judgment order a week later then the default judgment order will be overturned when you inform the court of these facts and ask to have the judgment cancelled.

You may have a couple of defenses to this action based on faulty notice and based on the chapter 13 bankruptcy filing, but you need to consult with an attorney who could appear in that court to defend you. Bankruptcy for yourself may be a last resort.

You have a number of options. For example, filing a motion to set aside the judgment. Anyway, contact an experienced lawyer to discuss all of your options. If the lawyer is worth his or her salt, you will have to pay for a one hour consultation. Time is of the essence, so move quickly. Good luck!

Unfortunately, being a guarantor has put you in this position and the chapter 13 is not available for you to use as a defense to the lawsuit. As a technical matter, the creditor should have obtained an order from the bankruptcy court lifting the stay from the bankruptcy proceeding, but it is not clear from your question whether they did so or not.

If you are the guarantor and the primary debtors are bankrupt the creditor has a right to recover from you, that is what the guarantee is all about. As for the judgment, there may be some issues as to its entry but it is doubtful it will be worth the fees to have it corrected if there is liability. You should confer with an attorney to determine your debtor's rights before they start collection action, which is coming shortly.

Your legal conclusion that "Under the bankruptcy terms, it relieves all guarantors" is untrue. Bankruptcy only relieves the debt of the persons filing not the guarantors. You might look into filing your own bankruptcy case as they have a judgment against you.