Luxury items you cannot afford to keep. Can filing bankruptcy help?

We can’t afford to keep our RV, our third car and our condo.  How can filing bankruptcy help us?

When times are good it is a common to load up on debts that later becomes unaffordable and then paying for the  luxury items may imperil a person’s ability to afford necessities.  The good news is that filing bankruptcy may help solve these problem..  You may already know that unsecured debts like credit cards, payday loans, and bills are dischargeable by filing Chapter 7 and Chapter 13 bankruptcies.  What about secured debts like automobiles and houses?

Let’s l

ook at the Chapter 7 debtor first.  In a Chapter 7 bankruptcy the debtor must declare his intention to either retain or surrender his indebted property.  If the debtor elects to surrender the property and stops making payments, the secured creditor will usually exercise its right to foreclose and take back the RV, car or condo.  However, the creditor is not obligated to foreclose and take back the property.  In certain situations, either because the secured property is of little value or because of lack of attention the creditor may choose to or neglect to exercise its right to take back the property.  If that happens it leaves the debtor remaining as the owner of the property but with no personal obligation to repay the debt secured by it.  The wise debtor will continue to retain insurance on the vehicle or dwelling because any accidents or financial claims that arise after the bankruptcy is filed will not be discharged and the debtor will be responsible.

A Chapter 13 will proceed similarly to the Chapter 7 example, cited above.  The debtor with secured property filing a Chapter 13 bankruptcy will list the property and the debt in the schedules as the Chapter 7 debtor would.  However, instead of filling out a statement of intention  form as the Chapter 7 filer does the Chapter 13 debtor can elect to designate the debt on the unwanted secured property as “not in the plan” and list the unwanted asset as property to be surrendered in the Chapter 13 plan.  When the Chapter 13 plan is confirmed by the court the automatic stay protecting the asset is lifted.  Practically, this means that the property will have to be made available for surrender at that time.  Typically, in a Chapter 13 bankruptcy the confirmation occurs within three months after filing of the bankruptcy.  Again, the wise debtor will continue to retain insurance on the asset because any accidents or claims that arise after the Chapter 13 bankruptcy is filed will not be discharged and the debtor will be financially responsible until the creditor takes back the ownership of the property.