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How to Keep a Car When Filing Chapter 7 Bankruptcy in St. Louis, MO

Choosing to file Chapter 7 bankruptcy in Missouri or Illinois can be quite a blessing. Finally, you can feel relieved without creditors hounding you, garnishments taking your paycheck, and threats of repossession and foreclosure put to a halt. But, how can you make sure you keep the property you want to keep? First of all, the number one job of a St. Louis bankruptcy attorney is to help you protect your property. That being said, in order to keep it, you will have to commit to it.

In a Missouri or Illinois Chapter 7, a debtor must complete a statement of intention. This is simply a document that tells everyone what you intend to do with property that is collateral on a loan. From there, the debtor has three options: reaffirm, redeem or surrender.

If you wish to keep property that you owe money against, for many of us this is our car, then your options are to reaffirm with the lender or to redeem. Reaffirming a debt is not as complicated as it sounds. Basically, when a debtor signs a reaffirmation agreement with a creditor they are entering into a legally enforceable promise to keep up payments on the loan in return for keeping the property secured by the loan. When an individual originally finances, for example, a car, they are affirming that they owe the debt. Well, a reaffirmation agreement is doing the same thing again. If you choose to reaffirm, you can keep your property as long as you go on paying the debt as you had before. Same monthly payments, same loan terms. This is often the best option if you want to keep your property, and many debtors find it much easier to make their car payment after they’ve eliminated monthly payments on credit cards, medical bills and payday loans.

In some cases, a debtor wishing to keep a car, computer, or other household items can by redeeming such property. This option involves paying the creditor one lump sum payment representing the fair market value of the property, which is often much less than the amount owed on the property. For example, if you owe $5,000 on your car, but the car is only worth $3,500, you would only pay $3,500 to the creditor in one lump sum to keep the car. There are a few companies out there that offer redemption loans so you do not actually have to come up with the larger lump sum payments on your own. This option is very appealing, especially for individuals who are upside down on a loan.

The third option is to surrender the property to the creditor. While you may very well want to keep your car or home, if the payment is going to cause you to fall behind again after your case is over, it may be a better idea to surrender it. It is best to think very hard about what is best for you and your family. Could you have a less expensive car? Can you afford the payment every month without any worry?

Life is full of tough choices. When it comes to Missouri or Illinois bankruptcy, you’ve got to give a little, but you get a lot more in return. Your car may or may not be something you want to give up, but make sure you are being honest with yourself before you make the decision.

To learn more about Chapter 7 bankruptcy and the most common mistakes that can get a case dismissed, request a free copy of my Illinois and Missouri bankruptcy book, “Get Out of Debt: Secrets Your Creditors Don’t Want You to Know.”

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