The Chapter 7 Statement of Intention in Decatur, Georgia

One of the biggest concerns for Decatur, Georgia debtors is keeping their homes and cars. A Chapter 7 statement of intention is vital in protecting your property. Luckily, most Chapter 7 bankruptcy debtors are allowed to keep their exempt property (property that’s not subject to liquidation because it’s worth too much) by continuing to pay on it. 

Where there is property that is financed with a loan, then the loan is secured. Examples of secured debt are mortgages and car notes where the creditor takes what is known as a security interest in the home or the car. Thus, the creditor is allowed to foreclose on the home or repossess the car upon default or failure to pay. Debtors who wish to keep property must continue to pay on the loan in order to prevent foreclosure or repossession. A good rule of thumb for Chapter 7 debtors is that if you want to keep something, you have to pay for it.

Now, many debtors choose to give up their property because they cannot afford it. That is perfectly okay, and the creditor will just make arrangements to acquire the property if it is a car or furniture or electronics. If the property is a home, then the creditor will schedule foreclosure after obtaining court permission.

In a Chapter 7 bankruptcy petition, debtors are required to complete what is called an Individual Debtor’s Statement of Intention for all secured property. The statement tells the creditor what the debtor wants to do about the property: keep it or surrender it back to the creditor.

The statement of intention does not necessarily bind you to either surrender or keep the property. If you change your mind, you can always amend the statement. Further, when it comes to keeping property such as a car or furniture, creditors do not allow debtors to “keep and pay” without signing an additional document known as a reaffirmation agreement. A reaffirmation agreement is a formal court document that obligates a debtor to repay a secured debt that would otherwise be discharged or wiped out in bankruptcy. Signing the reaffirmation agreement means that the debtor will always be obligated on the note (usually a car note), even after the bankruptcy case is closed. So long as the debtor is paying on the loan, s/he will be able to keep the property. Any default can result in repossession and the collection of any deficiency balance. On a positive note, timely monthly payments on a reaffirmation agreement can help you rebuild your credit after bankruptcy.

I am often hesitant to advise clients to sign reaffirmation agreements because the signing of such an agreement re-obligates them on debts that are wiped out. So, when a loan exceeds the value of the property, has a high interest rate or a high monthly payment, or is just not fitting with a person’s budget, it is not a good idea to sign the reaffirmation agreement.

For debtors who want to keep their houses in Chapter 7 bankruptcy, I usually indicate that they intend to keep the property on the statement of intention. However, it is not always a great idea to sign a reaffirmation agreement on a mortgage, as mortgage debt tends to be high. Plus, most mortgage companies are uninterested in foreclosing on property where the payments are being made in a timely manner, even absent the signing of a reaffirmation agreement. In any event, signing a reaffirmation agreement in a Georgia bankruptcy case requires careful thought and analysis of each individual’s situation.

If you are concerned about keeping your home or car when filing Chapter 7 bankruptcy in Decatur, Georgia, you should consult Atlanta bankruptcy attorney Law Offices of Charles Clapp at 404.585.0040 for a free consultation. Each person’s situation is different, so the best way to get sound advice is to schedule an in-person appointment.