When a Chapter 7 bankruptcy case is filed, chances are that you have some type of secured loan like a car loan or mortgage. Or you may be leasing property such as a car or apartment. In these cases, federal law imposes a duty on bankruptcy debtors to state their intention as to the retention or surrender of such property. Debtors who intend to keep a piece of property must state whether they are reaffirming the underlying loan related to the property or redeeming the property.
Within thirty days after the date of the filing of a Chapter 7 bankruptcy case or on or before the date of the meeting of creditors, whichever is earlier, bankruptcy debtors must file a statement of intention.
Surrendering the property simply means return the property to the creditor who is the lienholder. Debtors should stop making payments on any property they are surrendering once they finalize this intent. It must be returned within 30 days of filing a copy of the Statement of Intention to creditors that the property is being surrendered. A simple statement that you intend to surrender the property does not transfer title. Debtors should not waste exemptions on property that they do not intend to surrender. If the creditor doesn’t pursue the property and the Trustee abandons it, the debtor may keep the property.
An individual debtor may redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempt or has been abandoned. An individual may redeem by paying the holder of the lien the amount of the allowed secured claim secured by such lien in full at the time of redemption. For example, if you own an automobile and the creditor has a secured claim of $4,000. You may pay the creditor this amount and assume full ownership of the car. You are essentially buying it back from the creditor. The property may be redeemed in one lump sum. It may also be possible to obtain financing through a redemption loan. It is important to ensure that any equity in the property is exempted.
A reaffirmation means that you are agreeing to repay the debt despite that it could be discharged in the bankruptcy case. A reaffirmation agreement must be filed within 60 days after the first set date for the 341 Meeting of Creditors.
If represented by an attorney, a reaffirmation is effective upon filing with the Court, unless there is a presumption of undue hardship. This presumption of undue hardship is inapplicable as to credit unions. This presumption may be rebutted in writing by the debtor by including an explanation identifying additional sources of funds to make payments. Any presumption of undue hardship must be reviewed by the court. However, this presumption only exists for 60 days after the agreement is filed with the court. No agreement to reaffirm may be disapproved without notice and a hearing.
Theron Morrison has helped 8,000 people, including many people with payday loans, file bankruptcy and gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, Orem, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.