Chapter 7 Bankruptcy and Reaffirmation of Debt
Can you reaffirm and keep your home mortgage or car loan
Chattanooga Bankruptcy Attorneys
When a person files a Chapter 7 bankruptcy there are several options that must be carefully considered. One such issue involves the reaffirmation of secured debt. Many people who file bankruptcy under Chapter 7 have a mixture of secured and unsecured debt. These two (2) classifications of debt are treated differently under chapter 7 bankruptcy.
Typically all non-priority unsecured debt is discharged in a chapter 7, including items like credit card debt, medical bills, personal loans, telephone bills, civil judgments (with some exceptions), etc. When discharging these types of debt the bankruptcy debtor is able to walk away free and clear without any recourse and without surrendering property. However, the bankruptcy Trustee may still liquidate certain non-exempt assets in order to pay some of the unsecured debt.
In Chapter 7 bankruptcy secured debt is treated differently
First the bankruptcy Trustee does not liquidate assets in order to pay secured debts. The secured creditors are protected by the security interest (deed of trust, lien, etc.) which it holds in the property. For instance when you purchase a home the mortgage company records a Deed of Trust which provides that the the mortgage company holds a perfected security interest. An automobile purchased on credit is secured by a lien recorded on the face of the Certificate of Title, and the lender retains the original title until the loan is repaid in full. Other secured debts are handled in a similar fashion.
When you file a chapter 7 bankruptcy you have the option to either surrender the secured asset and discharge the debt, or reaffirm the debt and retain the asset. Sounds simple. But, there are a few issues that must be considered in making this decision, and limitations. One such limitation may be placed by the creditor. Most often if you are not current on your payments and in not in good standing with the creditor the creditor will object to reaffirmation and demand the surrender of the property – the debt would still be discharged. If you are not current on a secured loan, but still want to keep the asset there are some other options which may be available, which should be discussed with a bankruptcy attorney.
Role of the Bankruptcy Attorney and Reaffirmation of Debt
The other limitation may be enforced by the bankruptcy court – in order to reaffirm a debt you and your bankruptcy attorney must certify under oath that the reaffirmation will not create a financial hardship. In other words you must show that you can pay for the debt. There are not any predefined “limits” to the number of secured debts which can be reaffirmed, but the guiding principal of good faith is always present in such decisions. Explore all of your options by contacting a Chattanooga bankruptcy attorney today.
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