Fast contact handling of soft articulated characters is a computationally challenging problem, in part due to complex interplay between skeletal and surface deformation. We present a fast, novel algorithm based on a layered representation for articulated bodies that enables physically‐plausible simulation of animated characters with a high‐resolution deformable skin in real time. Our algorithm gracefully captures the dynamic skeleton‐skin interplay through a novel formulation of elastic deformation in the pose space of the skinned surface. The algorithm also overcomes the computational challenges by robustly decoupling skeleton and skin computations using careful approximations of Schur complements, and efficiently performing collision queries by exploiting the layered representation. With this approach, we can simultaneously handle large contact areas, produce rich surface deformations, and capture the collision response of a character/s skeleton.