QUESTION
What happens to the unpaid collateral in Chapter 7 bankruptcy?
Asked on Aug 28th, 2011 on Bankruptcy - Virginia
More details to this question:
If I file chapter 7 bankruptcy and I still currently owe an outstanding balance on a piece of merchandise (Laptop Computer), what happens to the collateral in the chapter 7? Is this item automatically surrendered to the bankruptcy Trustee in the bankruptcy estate so that the creditor of the Laptop will be able to seize the property? Or will I be required to continue payments on the outstanding balance if I want to keep the laptop?
10 ANSWERS
If you want to keep the laptop you will have to work it out with the creditor after you file the bankruptcy. The Trustee will most likely not be involved. The creditor could seize the laptop after the stay of execution has lifted unless you work out a reaffirmation of the debt or worked out a redemption of the laptop by paying what it is worth to keep it.
Answered on Sep 06th, 2011 at 1:58 PM
Daniel James Wilson
You will have several options. First, you may redeem the collateral. That means paying fair market value of the chattel, negotiated with the lender. Second, reaffirm the debt and continue making payments. I never allow my clients to reaffirm a debt that has been discharged. Third, surrender the collateral. In practice, lenders usually do not want the collateral back.
Answered on Aug 31st, 2011 at 11:45 AM
Bankruptcy Attorney serving Concord, CA
at
William Rubendall Attorney at Law
Update Your Profile
If you have a debt secured by collateral there are three choices or rights. One choice is to return the collateral and owe nothing. Another choice is to pya, in full and in cash, the fair market value of the collateral. Third, the debt can be reaffirmed, that is, paid in the usual monthly terms.
Answered on Aug 30th, 2011 at 3:24 PM
If you want to keep it, the lender will usually require a reaffirmation agreement to have you pay the balance over time. It will depend on the lender.
Answered on Aug 30th, 2011 at 2:50 PM
It's not automatic. You can choose to "reaffirm" the debt, not reaffirm but continue to pay as usual or surrender the collateral.
Answered on Aug 30th, 2011 at 12:16 PM
Glen Edward Ashman
Neither. Discuss this with your lawyer. (He'll know a way you MAY retain and not pay, and if the particular lender will repossess). This is why you don't do bankruptcies pro se.
Answered on Aug 30th, 2011 at 7:14 AM
2 Awards
You have the option of keeping the asset and continuing payment through a reaffirmation agreement, redeeming the asset by paying the fair market value, or surrendering the asset and discharging all debt.
Answered on Aug 30th, 2011 at 6:59 AM
Bankruptcy Attorney serving Hayward, CA
at
Carballo Law Offices
Update Your Profile
You can state your intention to surrender the laptop in the bankruptcy petition. The store will not come get it since it cost more to do that than the value of the old laptop. Such used property is worth very little. Who wants to buy an old used laptop? They will threaten to come pick it up but will not show up. Some people just pay the value of the laptop or other such merchandise as of the date the bankrupty case is filed but most people just ignore the calls asking for payment or call the creditor's bluff and tell the creditor to come pick up the merchandise. You do not need to send the merchandise. They have to come get it if they want it. Liens on items purchased at stores such as Best Buy are of doubtful legal validity under California law anyway and they know it. However, that will not keep the collection agency for the merchant from calling you to try get something from you.
Answered on Aug 30th, 2011 at 6:52 AM
Generally, you state your intention with respect to the property in the petition as surrender, reaffirm or redeem. If you want to keep the property, you may be required to reaffirm the debt. Doing so means that you agree to be obligated for the debt as if you never filed bankruptcy. It may also be possible for you to reach a deal with the creditor whereby you pay the current fair market value of the property instead of the outstanding balance owed.
Answered on Aug 29th, 2011 at 8:48 PM
Bankruptcy Attorney serving Herndon, VA
at
Maureen O'Malley
Update Your Profile
Basically it's treated as unsecured. If they send a letter about it, you can ignore it. If they call, offer to redeem it for $10 or so. If they refuse that, tell them to come get it. They usually won't. This is how lawyers handle it. Don't know if they'll go away so easily if you're not represented. Do not agree to pay what they call fair market value. No one will buy your system for much money at all.
Answered on Aug 29th, 2011 at 8:42 PM