Secured property in Bankruptcy: Houses and Cars
Protecting Your Biggest Assets
So one of the big concerns in bankruptcy is what will happen to certain important types of property such as houses and cars in which you are still making payments. These are referred to as "secured" debt, as the creditor maintains a security interest or lien on the property and has a right to get it back if you default on your payments. Generally you needn't worry about keeping your property provided you continue to make your payments. Remember your car or home creditor wants to get paid not have you default on their debt!
Reaffirmation Agreements- In bankruptcy your attorney will talk to you about something called a reaffirmation agreement. This is a document you may typically sign that reestablishes the principals of your secured debt which you execute or "reaffirm" after the bankruptcy has been filed. Once this is done you are essentially in the same position as you were prior to the bankruptcy being filed.
In some cases it may be advisable to not sign a reaffirmation agreement, such as in the situation of a huge debt on a car. Remember signing the Reaffirmation means you are back on the debt again and if you got into trouble after the bankruptcy and couldn't make your payments the car company could repo the car and sue you for the deficiency on the contract. We will make sure you know all the particulars of what to do and not do and make the best decision for your unique financial position.
In some cases the creditor may not bother with or care if you sign or don't sign a reaffirmation provided you keep making payments. In most cases even though you don't have a reaffirmation, provided you keep making your payments and are not late on payments the creditor will just leave you alone; though there is no guarantee they may not repossess the property in these circumstances!
With real property it is better to execute a reaffirmation on your loan, at least in terms of the primary mortgage. Not doing so may make it more difficult to refinance or obtain equity from your home at a later date.