Filing a Chapter 7 ultimately gives you your freedom back. Finally, you no longer have to deal with creditors harassing you by phone, garnishing your wages and threatening your property. But after you feel that wave a relief, it is time to think about the fate of your property. A bankruptcy attorney's primary concern should be to protect your property--but it all hangs on your commitment to it.
It all starts with the statement of intention. This document tells the court and your creditors what you plan to do with any property that is serving as collateral on a loan (like a car). You determine the fate of your property by picking one of three options. You can reaffirm the debt, redeem the property, or surrender the property. Two out of three options will result in you keeping your vehicle.
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To reaffirm the debt, you sign a reaffirmation agreement, which states that you will continue to make payments under the original terms of contract and, in exchange, you get to keep the property. Often, this is the easiest option for debtors to handle if they want to keep their property. A Chapter 7 can help you make it possible to keep up on payments you could not keep up on before by eliminating your unsecured debts like credit cards and medical bills. It won't be as hard to commit to paying your debt under the same terms if you aren't dealing with other debts weighing down your budget.
You can also choose to redeem the property. This involves paying the creditor one lump sum for the market value of the property instead of what you owe for it. For example, if you owe $7,000 on your car but it is only worth $5,000, you can pay the lender $5,000 in one lump sum. As you may have guessed, this option can be very appealing for someone who is upside down on their loan.
The third option is to surrender, or give back, the property to the creditor. Is this option really appealing to anyone? Occasionally, you may decide that keeping the car and continuing to make payments would actually be a detriment to your budget. Though you may love your car, if you cannot afford the payments, you must be honest with yourself. bankruptcy can be quite a blessing—but you still may have to make some tough choices to get the best outcome for yourself.
To learn more about Chapter 7 bankruptcy and the new life it could provide for you, look for free information from reputable attorneys in your area.
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