In Chapter 7 bankruptcy, you have several options when it comes to dealing with secured debts. You can reaffirm the debt, redeem the collateral, surrender the collateral and discharge the debt, or, in certain circumstances, retain the collateral and continue making payments without reaffirming the debt. Secured debts include mortgages; car loans; purchase money loans for jewelry, furniture, appliances and other household goods; title loans, and any loans for which you pledge already-owned property as collateral. To ensure your assets and legal rights are adequately protected, it is important to properly list all secured debts in your bankruptcy schedules and to indicate your intentions for each secured debt. A qualified Maryland and Washington DC bankruptcy attorney can help you prepare and file the required Chapter 7 paperwork.
Making decisions about whether to keep or surrender secured property involves weighing a number of factors. You will need to consider your present financial situation, anticipated changes in income or expenses, the likelihood of future default, and whether the collateral is a necessity. While most Chapter 7 debtors want to keep their homes and vehicles, they may be willing to part with other secured property if it means a sounder financial future. By surrendering unneeded and unwanted property, Chapter 7 debtors can emerge from bankruptcy better able to afford their mortgage and car payments. Sometimes, however, keeping your home and/or vehicle just is not practical. In those situations, you can surrender your house or car through bankruptcy to get out from under burdensome loan payments. A knowledgeable Washington DC and Maryland bankruptcy attorney can assist you in making important decisions about your secured property.
When a Chapter 7 debtor wants to keep secured property but cannot afford to redeem it, i.e., to pay the fair market value in one lump sum, a reaffirmation agreement may be a good choice. A reaffirmation agreement is a voluntary contract that allows you to keep secured collateral so long as you continue making regularly scheduled payments for it. If you can afford to make payments for the collateral you wish to retain, a reaffirmation agreement might be in your best interests. However, reaffirmation agreements should not be entered into without the advice of an experienced Maryland and Washington DC bankruptcy lawyer.
It is important to understand that reaffirmation agreements are binding contracts. Reaffirmed debts are not subject to the Chapter 7 discharge — you will still be legally liable for the debt after bankruptcy. That means if you fall behind on payments after your bankruptcy case is complete, the collateral can be repossessed and the creditor can come after you for the deficiency balance, i.e., the remaining balance after the collateral has been sold. If there is a good chance you will not be able to afford a loan payment after bankruptcy, it may not be wise to sign a reaffirmation agreement. In fact, depending on your particular circumstances, surrendering the property and discharging the debt may be your best option.
To learn more about reaffirmation agreements and other aspects of filing Chapter 7 bankruptcy, contact a dedicated Washington DC and Maryland bankruptcy lawyer today.