When filing a chapter 7 case, debtors must determine their choice of treatment related to property that acts as collateral for any of their debts. This is basically a choice of keeping it or surrendering it. Debtors make this choice through a form (Form 108) known as a “Statement of Intention” (SOI) filed with the bankruptcy court.

Even though the debt may be discharged, the creditor still has a right under the security agreement to utilize the collateral to satisfy some portion of the debt. Therefore, the debtor must elect to make some disposition of the property whereby the creditor may take advantage of its collateral and security for the debt. Thus, if a debtor chooses to keep or retain the property, they must then choose whether to redeem the property, reaffirm the debt or propose some other action.

A Statement of Intention must be filed if:

• creditors have claims against the debtor secured by the debtor’s property; or
• the debtor has leased personal property, and the lease has not expired.

Debtors identify the creditor and the collateral on this form. They then must choose between the following actions:

• Surrender the property.
• Retain the property and redeem it.
• Retain the property and enter into a Reaffirmation Agreement.
• Retain the property and [explain].

Here is a brief description of these actions:

*Surrender the Property

This is self-explanatory. The debtor surrenders or returns the collateral to the creditor in exchange for a discharge of the obligation on the debt.

*Retain the Property and Redeem It

When personal property is redeemed, a debtor pays the creditor the retail value of the property at the time the bankruptcy case was filed. This occurs even if the debtor owes more on the property than it is worth.

*Retain the Property and Reaffirm It

By checking the “reaffirm” box, the debtor is stating the intention to re-establish the debt obligation. Thus, the debt survives the bankruptcy case.

*Retain the Property and [explain]

Often, debtors are current on their car payments despite other factors forcing them into bankruptcy. Thus, a debtor typically checks this box if he desires to continue paying the creditor pursuant to the original agreement. If this box is checked, the debtor must write a short explanation of his intentions, such as retaining it without reaffirmation and continuing to make payments under the original agreement.

The last two boxes in Part 1 of the SOI requires debtors to indicate whether they are claiming the property as exempt. To learn more about exemptions, call our office for a free consultation or see our blog page.

Theron Morrison cares about protecting your rights. This includes negotiating with your car creditor in a Chapter 7 case when you wish to retain your car. Talk to the Morrison Law Group about your Chapter 7 or Chapter 13 bankruptcy options. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.