Can I File for Bankruptcy if I’m Unemployed?
A secured debt is a loan or credit obligation backed by collateral. This means that a specific asset may serve as collateral, and your creditor may exercise the right to seize it if you default on your payment obligation. Common examples of secured debts you may possess are your home, motor vehicles, and other expensive assets that require a loan or payment plan. Well, you may wonder if you can get shielded from such creditor collection activities when you file for Chapter 7 consumer bankruptcy. With that, please follow along to find out what happens to secured debts and how a proficient Rockland County Chapter 7 bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. can help you protect them in these proceedings.
What Happens to Secured Debts in Chapter 7 Bankruptcy?
For one, if your secured debt is eligible for discharge in your Chapter 7 bankruptcy filing, you may eliminate your financial obligation to pay it off. Secondly, though, your bankruptcy filing does not bar your creditors’ rights to place liens on the properties serving as collateral. This is to say that they may repossess the property or force its sale if you continually fail to make your debt payments on time. This may happen toward the end of your case, or sooner if the bankruptcy court decides to lift the automatic stay to open the door for foreclosure or repossession to continue.
You Must Declare Your Intentions, and There Is a Deadline
Choosing what you wish to do with secured assets is not something you can procrastinate on. The Code requires you to establish your choice in writing early in the case and then act on it. Missing either step has automatic consequences.
The Two Deadlines
You are required to file a statement of intention within 30 days of filing your bankruptcy petition, or by the date of the creditors’ meeting, whichever takes place first. This statement must say, for each secured asset, whether you are:
- Surrendering it
- Redeeming it
- Reaffirming the debt
- Claiming it as exempt
Once you complete your statement of intention, you will then have 30 days following the first set date of the meeting of creditors to do what you stated.
What Happens if You Miss Them
In the event you fail to file the statement, do not make a choice, or do not follow through, the automatic stay will end for the asset. As such, you no longer have protection for this asset, and your lender can repossess it without a motion, hearing, or even a warning.
How Can I Keep Secured Debts in Chapter 7 Bankruptcy?
Based on what you have learned thus far, you may now understand the importance of bringing your payments current before filing for Chapter 7 bankruptcy. You should only attempt this if it is manageable; otherwise, it may be in the best interest of your financial freedom to surrender this property and walk away from this crippling debt.
Protect the Equity with an Exemption
You may attempt to protect these secured debts through eligible bankruptcy exemptions. Essentially, bankruptcy exemptions are meant to protect your property’s equity. For example, in New York State, you may protect up to $5,500 in equity in a motor vehicle or $13,625 if the vehicle is equipped for a disabled person. For example, if your vehicle is worth $10,000, and you still owe $7,000 to your creditor, you may have $3,000 in equity. And so, this strategy may only be worth it if your property is worth more than what you owe on your secured debt.
Redeem the Property Outright
You may consider redeeming your property. This means that you may pay the value of the property in one lump-sum payment to satisfy your outstanding secured debt. After this, your debt obligation toward your creditor may be relinquished. In contrast to the bankruptcy exemption method, this may only be worth it if your debt balance is more than the property’s value. Of note, though, this may not be used for real estate, business, or intangible properties.
Reaffirm the Debt
One option that many are unaware of is reaffirmation. This occurs when you sign a new agreement, which essentially means you will remain personally liable for the debt, so the lender leaves the property alone. This is a common choice for those who need a vehicle to commute to work. However, this can be incredibly risky, as if the car is repossessed at any point, you will still owe whatever is not covered by the sale.
Contact an Experienced New York Bankruptcy Attorney Today
If you require further clarification on this issue, a talented Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. is willing to offer it. So please do not hesitate to contact our firm to schedule a consultation with a member of our dedicated team. We look forward to helping you.
