When you file for Chapter 7 bankruptcy, you will have to complete a form called the Statement of Intention for Individuals Filing Under Chapter 7. On this form, you tell the court whether you want to keep your secured and leased property—such as your car, boat, or home—or let it go back to the creditor.
If you’re like most people, you want to know what happens to the car or house you’re making payments on when you file bankruptcy. As long as you continue making your payments (and you can afford to), then you can keep your property. The Statement of Intention for Individuals Filing Under Chapter 7 tells your creditor whether you plan to keep your lease, or if you’re buying property, whether you want to surrender it, buy it from the creditor, or pursue other options for keeping it.
You can find the most recent version of the Statement of Intention for Individuals Filing Under Chapter 7 on the U.S. Court’s website at www.uscourts.gov/forms/bankruptcy-forms. (To learn more about getting this and other forms, see The Bankruptcy Forms: Getting Started.)
Before you fill out the form, you’ll need to understand what certain terms mean. Keep reading for a brief explanation of your options.
Letting the property go, or “surrendering the property,” is the simplest option. You just give the property back to the creditor. This is a good option if you don’t need the property; if you can’t afford the payment; or the property is worth less than you owe. In most cases, your bankruptcy discharge will wipe out your personal liability for the debt, and the creditor will have its property back.
The reason bankruptcy works is because it dissolves all of your contracts with your creditors so that you’re no longer responsible for the debt. Sometimes you need the property, however, such as the car you drive to work. You can often keep it by agreeing to enter into a new contract with the creditor, called “reaffirming” the debt.
You can stick to the original terms or negotiate new, more advantageous terms. If you decide to reaffirm, you must file the reaffirmation agreement with the court and attend a hearing, where the judge will decide whether the agreement is in your best interests. To prevent losing this option, this must be done before your case is over.
Some creditors will allow you to keep the property without reaffirming or redeeming, as long as you remain current on your payments. The creditor would still have the right to repossess at any time, though often the creditor accepts the payments and turns over the vehicle’s title once the debt is paid. Because no contract exists between you and the creditor, however, your payments aren’t reported to credit bureaus. The problem here is that timely payments won’t help rebuild your credit.
To redeem the property, you buy it back from the creditor. To do this, you must pay either what you still owe on the debt or the replacement value of the property, whichever is less. Since the payment must be in a lump sum, this is a rarely used option since most people filing bankruptcy don’t have large amounts of money available to them. This approach can’t be used for business property, real estate, or intangible property (such as intellectual property) and requires you to file a motion with the court.
To learn more about these options, see Your Debts in Chapter 7 Bankruptcy.
At the top of this three-part form are detailed instructions that are self-explanatory once you understand the terms discussed above. In Part 1 you tell the court what you want to do with the property you’re buying (secured property). In Part 2 you declare whether you want to keep your lease. Part 3 is where you sign and date the form.
In Part 1, provide information about the property you’re buying as follows:
In Part 2, you’ll provide information about your personal property leases (do not include leases for real property, such as a leased home or apartment):
Sign and date the form.
You must file this form with the court and deliver it to either your creditor or whoever holds your lease within 30 days of filing your bankruptcy or by the first date set for your meeting of creditors, whichever comes first. If you don’t do this on time, you may lose your personal property (anything other than real estate, such as a home) after that period expires and the creditor regains the right to repossess it.
This article provides general information only. There are many legal issues involved and important decisions to be made when filing for bankruptcy. You must understand the entire bankruptcy process, learn about the applicable federal and state laws, and determine how those laws will affect your particular situation before you complete the bankruptcy forms. If you want to file bankruptcy without a lawyer, use a good do-it-yourself book like Nolo's How to File for Chapter 7 Bankruptcy to ensure you make well-informed decisions about your bankruptcy case.