Whether you can keep your property while including the claim of the creditor who sold you that property depends on the nature of the property you purchased, the date of purchase and the paperwork you signed.
Secured Claims
If your creditor’s claim is secured, you will only be able to keep the property if you pay for it. In a Chapter 7, you can reaffirm the debt, redeem the property by paying a (discounted) lump sum, or, in some cases, just keep making your regular payment without signing anything.
- A creditor’s claim is secured if you sign paperwork that ties the specific property to the money you borrowed. For example, if you finance a motor vehicle and finance your purchase with Toyota Motor Credit, your vehicle will secure the loan. If you miss payments, Toyota Motor Credit will send out a repo agent and pick up the car, then sell it at auction.
You cannot discharge a debt to a secured creditor and keep the collateral. You have to make a decision – keep the property and pay, or surrender the property and get out of the debt.
In a Chapter 13, you will pay secured creditors as part of your plan. However, you may be able to reduce the amount of the claim and the interest rate if the secured claim is old and the secured property is anything other than real estate.
Unsecured Claims
If your creditor’s claim is unsecured, there is no linkage between the debt and the property you purchased. For example if you went to Best Buy and purchase a TV and washing machine using your Visa card, your debt to Visa will most likely be unsecured. If you don’t pay, Visa can sue you but they can’t repossess the TV and washing machine.
- If you file Chapter 7 and discharge $10,000 or $20,000 or more of credit card debt, you can eliminate the debt and keep your property.
- In Chapter 13, you may end up paying back your credit card debt at one or two cents on the dollar.
Of course, you are likely to draw objections from the credit card lender if you make big ticket purchases right before filing bankruptcy. Further, property that you list as owned may or may not fit within the bankruptcy exemptions available to you.
No “One Size Fits All” Answers
As you can see, there are no easy answers to questions about debt, property and creditor claims. Everything depends on the specifics of the paperwork you signed, the timing of your purchase and the type and value of property purchased.
As a general observation, most people who file bankruptcy do not lose any property they want to keep, and most creditor objections can be resolved.
If you are struggling with credit card or other debts and you want clear and accurate advice about how bankruptcy may help you deal with this debt, please call Jonathan Ginsberg or Susan Blum at 770-393-4985.
