How to File Bankruptcy and Keep Your Property

Bankruptcy offers a sound solution for emerging out of insurmountable debt. The thought of losing property during the bankruptcy process can be un-nerving for many people. With the advice of an experienced Los Angeles bankruptcy attorney your property can survive bankruptcy.

When you file bankruptcy, all debts are divided into two categories: secured and unsecured.  Secured debts use the item purchased as the collateral. Secured debts include our home, automobile, furniture, etc. This means that if you default (fall behind on your payments) on a secured debt, the creditor can seize the property. Unsecured debt is simple a loan or line of credit that does not use property as collateral. Unsecured debt typically includes credit card debt. In a bankruptcy, unsecured debt is either exempt, discharged or paid off. Secured debt that does not meet an exemption can without here are two procedures in bankruptcy that will allow you to retain your secured personal property.

Redemption

Through the redemption process, individual debtors may retain secured property by offering to pay the creditor the property’s value. You and your creditor must agree on the value of the property. You should only redeem property if you owe more than what it would cost to replace the item and the lien can survive the bankruptcy. Redemption works best for small household items that you can easily pay for in cash though, it is possible negotiate for making installment payments. 

Reaffirmation

Another method used to preserve property during bankruptcy is to reaffirm certain debts by signing a new contract and continuing to make regular payments to the creditor. Reaffirmation means that your debt does not get discharged through bankruptcy. Therefore, you remain bound under the new payment agreement terms. If you don’t make your payments your creditor may initiate collection actions against you. Your reaffirmation agreement must be certified by your attorney and approved by the court.

Filing bankruptcy doesn’t mean you have to part with property. An experienced attorney from the Law Offices of Michael Jay Berger can help you keep your valuable property and help you manage your debt-load.