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Retaining secured property after Chapter 7

A concern that many Pittsburgh residents have when they file for Chapter 7 bankruptcy is what will happen to their property. Worrying that certain properties like a home or a motor vehicle will be repossessed is natural. There are some cases when a secured creditor can seize property from an underlying debt after the discharge. In such an instance, the debtor has the right to reaffirm the debt, pay what is owed and retain it. It is important for people who are confronted by this circumstance to understand how it works.

The reaffirmation agreement is between the debtor and the creditor to pay what is owed even if it would otherwise have been discharged as part of the Chapter 7. When the debtor agrees to pay what is owed, the creditor will say that the property will not be repossessed provided the debt is paid. To reaffirm the debt, it must be done before the discharge. A written reaffirmation must be signed and filed with the court.

There are disclosures about which the debtor must be advised as to the reaffirmation and how it is calculated. This will mean that the personal liability will not be discharged. The debtor must also sign and file a statement of the current income and expenses showing the balance of income will be enough to pay the debt. If there is not a sufficient balance, there will be a presumption of undue hardship and the reaffirmation might be denied by the court.

For people who are seeking a discharge through Chapter 7, but have a property that is a secured debt and are concerned about its repossession and want to keep it, reaffirmation is an option. It is essential to speak to an attorney about filing for Chapter 7 and all its aspects before moving forward with a reaffirmation.

Source: uscourts.gov, "Chapter 7 -- Bankruptcy Basics -- The Chapter 7 Discharge," accessed on July 10, 2017

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