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Chapter 13 and Surrendering Property



Chapter 13 bankruptcies are typically taken by individuals who already have a considerable amount of property and who would prefer not to lose it in a liquidation to cancel out their debts. Unlike in chapter 7 bankruptcies, debts are not automatically discharged when you take chapter 13. Instead, you are placed under a bankruptcy trust, which will allow you 3-5 years to pay off most of your debts and will protect against delinquency fees and undesired repossession.

How to Surrender Property Under Chapter 13

Because Chapter 13 gives you more of a choice with what to do with your property, you need to make that choice clear in a court of law if you plan to surrender property to pay off your outstanding loans. You should consult with your lawyer to make clear in a bankruptcy court that

  • You are actively planning to resolve your debts.
  • You will divest yourself of responsibility for your property.

This must be provided for by the plan set out in the chapter 13 agreement.

Because this involves highly technical legal language, you are best served finding proper legal representation to surrender your property. While Chapter 7 bankruptcy mainly deals with liquidating certain possessions and canceling certain debts, Chapter 13 deals with more choices regarding what you will and will not surrender. It is less of an action and more of a long, drawn-out process. Chapter 13 bankruptcies are more like 3-5 year debt repayment plans, and every choice for surrender and repayment of your debts should be legally documented.

Legal Language Must Be Clear

As far as legal language is concerned, surrendering property does not necessarily divest oneself of responsibility for that property. This may leave you with debts in property that you do not own.

Your legal representative must help to broker an agreement between your bankruptcy trustee and your creditor for the divestiture of your responsibility for your property. For a car, this usually involves repossession; for a home, this involves a modified foreclosure. Contact a legal representative today if you wish to surrender property to pay off debts in a Chapter 13 bankruptcy.

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