Those considering bankruptcy protection often wonder what happens to property that is subject to a lien.
In some cases, a bankruptcy court may set aside or reduce the lien on the property, allowing more flexibility in bankruptcy process.
If individuals (or spouse’s filing jointly) wish to keep the property secured by a lien, they can also agree to a reaffirmation plan with secured creditors. A reaffirmation agreement is a promise to continue to pay the amount owed despite the bankruptcy, in exchange for the creditor not seizing the property.
If the debtor makes regular, on time payments, the agreement will stand. If a debtor defaults on payments under the reaffirmation plan, the creditor can hold him or her liable on any past due amounts and repossess the property.
Many are able to afford payments on property they wish to keep if they are able to reorganize debt under bankruptcy, discharging some debt while maintaining payments on other property.
An experienced bankruptcy attorney will ask you what financial goals you wish to achieve through the bankruptcy – it is not one size fits all solution.
If you have questions regarding bankruptcy such as: “what are the differences between a chapter 7 and chapter 13?”; “what property is exempt in a bankruptcy?”; or “what debt is dischargeable under bankruptcy protection?”, contact the Peoria bankruptcy law office of Charles E. Covey for more information at 309-674-8125.
