Preserving your Property in Bankruptcy through Redemption and Reaffirmation

Bankruptcy offers a sound solution to people who want to get rid of an overwhelming amount of debt.  When you file for bankruptcy relief, your debts are divided into two categories: secured and unsecured.  A secured debt is one for which the item itself,  such as a residence, automobile, furniture, or other possession, functions as collateral for the credit that was given to you.  This means that if you default on your secured debt payment, then the creditor can seize the property typically by a mortgage foreclosure action or repossession action.  Losing property during the bankruptcy process is a major concern for many people.  Consider the following options that help many consumers keep their secured personal property.

 Redemption

 Through the redemption process, individuals may keep secured property by offering to pay the creditor the dollar amount of the property’s value.  You and your creditor must agree on the value of the property.  Redemption works well in situations where small household items are the secured property and you can easily pay the redemption amount in cash.  IN some cases a creditor may agree to accept a few installment payments to pay the total redemption dollar amount.  Property that may be redeemed must meet the following criteria:

            ●   The debt must have been obtained for personal, family, or household use;

            ●   The debt must be secured by tangible personal property – redemption does not apply to real estate; and

            ●   The property must be properly exempted or abandoned by the Trustee.

 Reaffirmation

Another method of keeping secured property during and after a bankruptcy case is accomplished by reaffirming a debt.  Simply put, you will sign a specific document prepared by the creditor that explains what property is secured by the debt, the current dollar balance of the debt, and the payment terms.  If you decide to enter into a reaffirmation agreement and later find that you cannot afford the payments, then the creditor could still seize, or repossess, the property and pursue any additional deficiency balance against you.  The reaffirmation agreement must be signed by your bankruptcy attorney and approved by the bankruptcy court.  In some cases it is possible to negotiate a lower principal balance or lower interest rate prior to signing the agreement with the creditor.

Our experienced bankruptcy attorneys can assist you with the choices you will face in a bankruptcy case.  Filing bankruptcy does not mean that you must surrender your property.  With guidance from an experienced Pennsylvania bankruptcy attorney you can save valuable property and manage your debt.

By Harold Shepley | Published November 5, 2013 | Posted in Bankruptcy | Tagged bankruptcy reaffirmation, bankruptcy redemption | Leave a comment