When you file bankruptcy, all of your debts must be listed on your bankruptcy petition, including debts secured by property.
The most common debt secured by property is a car, truck and recreational vehicles.
The bankruptcy code requires debtors, that’s the name they give you when you file bankruptcy, to state their intention regarding the collateral that secures the debt – the car.
So, let’s talk about cars and your intent in bankruptcy.
Usually, when you file bankruptcy, one of the forms that is included is called the Statement of Intention. This is where you state your intention regarding a car – or other secured debt.
You have 3 choices when it comes to intent – you can reaffirm the debt, which means you sign a document that commits you to the loan into the future.
You can redeem the property, which means you work out a payoff with the lender to satisfy the loan and the lien is satisfied and removed from your auto title.
The third option is to surrender the vehicle to the creditor. This is the option that I’m going to discuss here.
Surrender of a vehicle is usually your best option when the loan amount exceeds the value of the car. Or, if the payments are very high and you don’t want to keep making payments, you probably want to surrender the car.
However, the bankruptcy code has very specific requirements that have to be performed by a debtor regarding intent.
First, your intent on the car, is usually stated at the time of the filing of your case. Your statement of intent must be made in writing within 30 days of the filing of your case on the Statement of Intent form.
Second, you have to perform on your intent within 30 days from your creditor meeting date.
Failure to do either can affect the dischargeability of your debts, or can affect the automatic stay that is imposed at the time of filing of your case.
The automatic stay is a court order issued at the time that your case if filed that tells creditors that they may not take any collection action.
In the case of a car, if your intent is to surrender the car, then you must give the car back to the creditor within 30 days of your creditor meeting.
So, the longest period of time that you can continue to drive your car is no longer that 60 days or earlier.
Just make sure that you carry vehicle insurance on the car if you continue to use the vehicle because if you don’t, and you are involved in an accident that is your fault, that creates a new debt that won’t be covered in your current bankruptcy because if occurred after the filing of your bankruptcy case.
If you live in Wisconsin and would like to file bankruptcy, please call me for a free consultation. You can find me online at robertflessas.com.
