Surrendering Your Home or Car in Bankruptcy

Sometimes a debtor(s) realize that they can no longer afford to make payments on their home or car and decide to surrender it during the bankruptcy.

While the bankruptcy will discharge the underlying obligation to pay for the debtor(s) mortgage or car loan it is still ultimately up to the bank on when to retake possession of the debtor(s) home or car.  Therefore the debtor(s) will still be responsible for maintaining the insurance on the property and are responsible for its up keep (mowing the lawn, cutting bushes, etc.).

Often times it may take the creditor a while to repossess or foreclose on a car or home.  Debtor(s) may continue to enjoy the property even after the bankruptcy, but must be cautious because the creditor  will  foreclose and evict the debtor(s) at some point.

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Post Petition Payments to Secured Creditors

The following is a list of necessary payments for bankruptcy clients who intend to keep their home or car.

All secured debts, such as mortgages and car loans that the debtor(s) intend to keep must continued to be paid.  Chapter 13 clients: all payments must be paid after the date the bankruptcy is filed (post petition). This is excluding any creditors which are paid through the bankruptcy plan.

Home owners insurance and automobile insurance must be maintained on any home or vehicle that the debtor(s) intend to keep through the bankruptcy.

All Home Owners Association fees must continue to be paid after the bankruptcy is filed. In some instances in a Chapter 7, the past due amount prior to filing, may be discharged.

Debtor(s) must continue to make all utility bill payments on any utilities that they intend to maintain during the bankruptcy and after.

Debtor(s) must continue to make all of their rent or lease payments on any rental or leased property they wish to keep.

Note this list is not exhaustive and is a suggestion and does not constitute legal advice.  It is important if you are considering bankruptcy to contact an attorney in your area.

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The 341 Meeting of Creditors

Section 341 of the bankruptcy code requires that every debtor seeking relief under the bankruptcy act, attend a meeting of creditors. The debtor(s) will need to bring a copy of his/her social security card and a photo identification card. The purpose of this meeting is for the bankruptcy Trustee to examine the debtor(s) and to allow creditors to question the debtor(s). In most chapter 7 and 13 cases few or no creditors attend, and the questioning centers around reviewing the bankruptcy petition. The Trustee is trying to establish if the debtor(s) disclosed all of their assets (personal property and real estate), whether they disclosed all of their sources of income (wages, trust income, child support) and, whether there are any non-exempt assets that can be used for liquidation.  In a chapter 13 the Trustee will inquire if the plan proposed by the debtor(s) is feasible (can the debtor(s) afford the payments).  In a chapter 7 the Trustee may also inquire about the debtor(s) means test information to confirm that they have filed under the right chapter.

The 341 meeting is mandatory and all debtors must attend. If the debtor is unable to attend, and has a legitimate excuse such as a medical emergency, they should contact their attorney as soon as possible because the attorney may be able to get the meeting continued for a future date.  If the debtor(s) fail to attend then the Trustee can move to have their case dismissed.

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