In today's credit driven world, it's very common to see individuals filing bankruptcy and reaffirming debts. The debts are not typical debts like credit cards, but secured debts like a car loan or a mortgage. Everyone's situation is completely different so the matter should be discussed with a bankruptcy attorney, but using a basic rule of thumb version should be to let the property go if they can't afford it. Then again, once they have freed up all that cash by wiping out all their credit card debt in medical bills in a Chapter 7 bankruptcy discharge, they might be able to afford it now. In the past, the security found in the object was good enough for most lenders. Now, most lenders require a debt reaffirmation agreement with the debtor that is filing bankruptcy. Some bankruptcy trustees will also require debt reaffirmation agreements to be submitted to the bankruptcy court.
At the time of filing Chapter 7 bankruptcy, an individual needs to do some true soul-searching and make the decision of what property to keep and what to let go. It's always a good idea for the individual to bounce their thoughts off the bankruptcy attorney to get their opinion. Every situation will have a different answer, especially in today's economy. It is true, that everyone needs a place to live and if they own a home at the time of the bankruptcy filing, they need to try and take a snapshot of their future to help them weigh their decision. The real estate market is continuing to decline and if someone is lucky enough at least both what the value of the property is they are not in too bad of shape. The way the real estate market is going that could quickly change and the individual can end up upside down on their home. For these folks, it is a good idea to strongly consider surrendering the home in the Chapter 7 bankruptcy. Including the home and the bankruptcy filing will eliminate any liabilities to that piece of property. For example, if the market continues to decline and six months after the bankruptcy discharge, the individual finds themselves unemployed, they will still be on the hook for any damages the lender might incur if the debtor decides to walk from the home at that time. The individual could be held liable for any legal fees, foreclosure costs and any deficiency after the home is resold at auction.
Including the mortgage when filing Chapter 7 bankruptcy, will allow the individual to include these costs in the bankruptcy discharge. There will be no recourse from the lender towards the debtor. This also applies to automobile loans. It's common for a bankruptcy attorney to talk to their client about purchasing a reliable automobile that they can afford, if they are upside down on the car they are currently financing. Many people are buried upside down on their car loans and if for some reason they can no longer afford it, the lender will repossess the vehicle at the expense of the debtor. Since the bankruptcy has already been discharged and filing bankruptcy again is not an option, the lender could pursue legal action to recover any damages.
This is why it's a good idea for an individual to sit down and discuss this matter seriously and honestly with their bankruptcy attorney. The bottom line is, a person can always buy another house or another car. After the bankruptcy discharge in a short amount of time, credit will soon be available allowing the individual to start making financed purchases again
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