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Chicago Bankruptcy Question: What is a Statement of Intention?

Chicago Bankruptcy Question of the Day: What is a Statement of Intention in a Chapter 7 bankruptcy?  When you file for Chapter 7 bankruptcy protection in Chicago, one of the documents that you must file is a Statement of Intention.  This is a statement that tells the bankruptcy court, Chapter 7 trustee and the secured creditors in your case what your intent is with regards to the secured debts that you have.

The Chapter 7 Statement of Intention lists each of the secured debts that the person filing for Chapter 7 bankruptcy has, along with the collateral that secures the debt.  It then shows whether or not the filer wishes to surrender (give back) or keep (retain) the collateral.  When you file for bankruptcy, it is your option as to whether or not to keep the collateral.  If you elect to surrender the collateral, then the creditor is allowed to recover the property, either by foreclosure, repossession or replevin, depending on the type of collateral.  The debt is then discharged in the bankruptcy.

If the filer wishes to keep the property that secures the debt, as is often the case with homes and financed vehicles, then the filer must state how they intend to keep the property.  For vehicles and personal property, the debtor may be able to redeem the property, meaning that they will pay the fair market value of the property to the creditor, who is then required to release the lien.  Determining the fair market value is the cause of some litigation, but a good Chicago bankruptcy attorney will ensure that you get a reasonable deal.  They will also assist you in obtaining financing if you cannot come up with the lump sum funds required to redeem property.

If you wish to keep the property and maintain payments under your current contract, you would then usually elect to reaffirm the debt.  This requires a separate agreement, called a reaffirmation agreement, wherein you agree to take personal liability on the debt again.  These agreements are very common for financed motor vehicles that the filer wishes to keep.  The reaffirmation agreement must be filed with, and sometimes approved by, the bankruptcy court.

Lately, with property values being as low as they are, many filers are worried about taking personal liability back for their mortgages.  A good bankruptcy lawyer will not recommend signing a reaffirmation agreement in that case.  Instead, we recommend that you continue making the mortgage payments without a reaffirmation.  This means that the mortgage company cannot report on your credit anymore, which may slow the credit rebuild process, but it also means that if bad things happen and you are forced to walk away from the property, you cannot be held liable for the mortgage.

Proper preparation of your Chapter 7 Statement of Intention is an important element in any Chapter 7 bankruptcy filing.  The experienced bankruptcy attorneys and Ledford & Wu will prepare these documents properly and explain all of your options (we will not just put it in front of you and say "sign here").  Call us today for a free consultation.

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