February 2018

06 Feb Why Surrendering Your Car or House in a Chapter 13 May Create Unexpected Problems

One of the more powerful tools available to you when you file a personal bankruptcy has to do with your option to cancel an installment contract and surrender secured collateral. This applies to all forms of secured collateral, including such things as houses, motor vehicles, furniture, and jewelry. In a Chapter 7, your surrender of secured collateral will usually mean an end to your obligation to the secured creditor. Any remaining debt owed to the creditor for a deficiency balance will be treated as unsecured debt and unsecured debt is generally going to be eliminated with your Chapter 7 discharge. In Chapter 13, however, your act of surrendering collateral does not necessarily mean that you are done with the now unsecured creditor. Unsecured creditors often do get paid in Chapter 13 - sometimes as little as 1 penny on the dollar, but sometimes as much as 100 pennies on the dollar (i.e, they are paid in full).
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