One of the biggest fears about filing a Chapter 7 case is losing property. It is one of the most common bankruptcy questions that my office receives. The fact is that almost all Chapter 7 cases filed in New Jersey are “no asset” cases. In a “no asset” case, the debtor does not lose any of his or her property to the bankruptcy trustee. The debtor is able to discharge thousands of dollars in debt while keeping all of his or her property.
However, in the case of property secured by a lien, whether the debtor retains the property is not a matter for the court but a matter for the debtor and his personal budget. A secured lien against property is discharged only as to the debtor. It remains a lien against the property itself.
I Am Financing Furniture And Electronics. Will I Lose Them If I File Chapter 7?
For example, if a debtor is financing furniture and electronics, the property in question is subject to a secured lien. The Chapter 7 bankruptcy discharges the debtor’s legal liability to repay the secured lien; however, it does not remove the lien from the property. In other words, the secured lien against the property survives the bankruptcy. Whether the debtor retains the furniture and electronics subject to a secured lien depends on whether the debtor can afford to continue making the monthly payments to the creditor.
The debtor has several options regarding a secured lien in a Chapter 7 bankruptcy. The most common options are to surrender the property or reaffirm the debt. If the debtor chooses, he can surrender the furniture and electronics to the creditor and wipe out the debt completely. On the other hand, the debtor may choose to reaffirm the debt and keep the property. If the debtor reaffirms the debt, he must pay the debt in full to retain the property. Should the debtor fail to repay the debt in full, the creditor can repossess the property and sue the debtor for any money owed once the property is liquidated. By reaffirming a secured lien, the debtor is forgoing bankruptcy protection for that debt.
Making the Decision to Reaffirm a Secured Lien
In many cases, once the debtor discharges his unsecured debt, he can afford to make the payments on the furniture and electronics that he has financed. However, reaffirming a secured lien is something that should be considered carefully because you are forgoing the protection offered by filing bankruptcy. Your attorney will discuss the benefits and disadvantages of reaffirming debts so that you can make an informed decision whether it is in your best interest to agree to repay a secured lien simply to keep property that may or may not be worth what you owe on it.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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