In Chapter 7 bankruptcy, one of the forms you must file with the court is the Statement of Intention for Individuals Filing Under Chapter 7. On the statement of intention, you explain what you plan to do with your secured debt and unexpired personal property leases. Read on to learn more about your options and how to prepare this form.
You file the statement of intention to inform the court, the bankruptcy trustee, and your creditors about what you intend to do with:
Property securing a debt. If a creditor has a security interest (lien) on your property, its debt is considered secured in bankruptcy. Secured creditors typically have a right to repossess or foreclose on your property if you don’t pay back your loan (default) as agreed. The most common examples of secured debts are your mortgage and car loan. In most cases, filing for Chapter 7 bankruptcy doesn’t eliminate a secured creditor’s lien, so you must choose to either keep the property (and continue paying for it) or give the property back to your creditor. You let the court know your choice on the statement of intention.
Unexpired personal property leases. If you have a personal property lease that’s in effect when you file for bankruptcy, you’ll include it on the statement of intention. A lease is a type of contract that allows you to use property for a period of time. When the lease period is over, you give the property back. A personal property lease involves any type of property other than real estate, such as a car, paint sprayer, or wood chipper.
On the first part of the statement of intention, you’ll list the name and address of your secured creditor and explain what you want to do with the property that secures the debt. You’ll indicate whether you want to keep an unexpired personal property lease on the second part of the form.
You must decide what you want to do with property that secures payment of a debt. Your choices include:
Here’s what each of these options mean.
Surrender the property. If you don’t want to keep making loan payments, you can give the property back to the creditor. This approach prevents the creditor from coming after you to collect the remaining balance you owe. (Learn more about surrendering property in Chapter 7 bankruptcy.)
Retain and redeem the property. Redeeming property allows you pay your creditor what your property is worth (replacement value) instead of what you actually owe. For example, if you owe $10,000 on a car worth $5,000, you can redeem it (pay it off) for $5,000. While redeeming property can be a money saver, most bankrupt people can’t come up with the entire redemption amount required. You should also be aware that you can’t redeem real estate or business-related property; only consumer personal property. (Learn more about redeeming property in Chapter 7 bankruptcy.)
Retain the property and reaffirm the debt. Filing for bankruptcy automatically severs all of your contracts. But sometimes that’s not what you want. You can “reaffirm” a debt (get back in a contract) by signing a reaffirmation agreement. Car debt is common type of reaffirmed debt, and, in fact, some creditors require a reaffirmation agreement if you want to keep your car. Understand, however, that once you sign, you become responsible for the entire outstanding balance, so it’s important to carefully consider your options before reaffirming a debt for property worth less than what you owe.
Retain the property and do something else. In some cases, you can take some other type of action with your secured debts. For example, you might be able to avoid (eliminate) certain types of liens. Also, some courts allow you to simply keep the property—such as a car—and continue making payments; although this doesn’t work in all jurisdictions. If you want to avoid a lien or do something else with the property, you can check the “Retain the property and [explain]” box and fill in your intention in the space provided.
If you have an unexpired personal property lease—such as for a car or equipment—you’ll provide the lessor’s name, describe the leased property, and check the box indicating whether you will assume or reject the lease. If you have a valuable lease that can generate a profit for the bankruptcy estate, the trustee has the power to assume the lease for the benefit of your creditors. In most cases, the trustee won’t assume a lease unless it has value for the bankruptcy estate (for example, if you are paying well below the market rate).
You must file the Statement of Intention within 30 days after filing your bankruptcy or prior to the date of your meeting of creditors, whichever is earlier; however, you might want to file it with your bankruptcy petition and schedules. If you forget, you will lose the automatic stay’s protection and your creditor will be able to take back (repossess) the property.
You can find a downloadable, fillable version of the Statement of Intention for Individuals Filing Under Chapter 7 (and other official bankruptcy forms you might need) on the U.S. Court’s website.
This article provides general information only. When filing for bankruptcy, you must understand the federal and state laws governing the entire bankruptcy process. Failing to adequately research and understand how these laws might affect your case could result in unexpected consequences. If you aren’t familiar with the process, it's best to consult with an experienced bankruptcy attorney, or, use a do-it-yourself book like Nolo's How to File for Chapter 7 Bankruptcy.