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When filing Chapter 7, do I have to relinquish secured debts if I'm able to keep the payments current? Car, condo.

Orange, NJ |

My husband and I own a condo that we refi'd last year for lower rate. I doubt there's any equity. We have two cars that we're still making payments on. Our credit card balances have gotten out of hand, mainly due to cash advances taken when he was out of work. 0 interest rates are no longer 0. We can't save & just make payments with all of his salary and mine is food, gas, some bills, car ins. He makes a decent living but it all goes to bills. He was out of work in the fall for a surgery, we took a small loan to keep things afloat. He returned back to work for 1 1/2 months and just had an injury at work. Workers comp is far less than his normal salary and I'm thinking Ch 7 or even 13 may be our only way out. We have nothing to fall back on. I don't want to lose everything

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Attorney answers 7


So long as you are current on the mortgage payments, and you can exempt any equity in the condo, you will be able to keep it. As for the car, most car lenders will allow you to keep the car so long as you remain current on the payments, but some will require a reaffirmation agreement to be filed with the court. Bankruptcy is a complicated process - even moreso when real property is involved, and it is best that you have an attorney to guide you. through the system.

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In Chapter 7 the consumer has the option of keeping the collateral, and making the payments, or abandoning the property, in which case they eliminate the payments but lose the collateral. A third, rarer, option with personal property is redeeming, if for example a car is worth a lot less than what is owed. But yes you can almost always keep your home and car in a Chapter 7. Go see an attorney in your area today to find out your rights, and an analysis of whether 7 or 13 works best for you.

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If you keep the payments current and there's no equity, you can usually keep the collateral. Speak with your bankruptcy attorney for more details, since there are circumstances where you might not be allowed to keep the collateral.

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In a Chapter 7 case, you can try to re-affirm your secured debt (like on your home or cars). However, the court will have to make the determination if that is in the best interests of all. You may want to consider a Chapter 13 case, if eligible, where you can try to create a plan that will allow you to keep certain assets.

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We do this all the time, it's called a reaffirmation agreement


You are certainly free to continue paying on secured debt such as mortgages and car loans. Indeed, for any car leases or loans, you are going to have to sign a new promise to pay those debts, called a reaffirmation agreement, that will make those debts not discharged, meaning you will be fully liable on those debts.
You do have the option to shed secured debt that you cannot afford or for cars etc that you do not want to keep. The lender just recovers the vehicle with any loan balance in excess of the auction sale value becoming an unsecured debt treated the same as other unsecured debt such as credit cards.

The foregoing answer is for informational and educational purposes, not for purposes of legal representation. This answer is based on New Jersey law and is necessarily general in nature.. Laws in other states may be different, and each situation is different, so this answer might not apply accurately to you. No attorney client relationship is to be implied from this answer. Always seek independent legal advice.


I believe that you and your husband would qualify for bankruptcy assistance. In NJ, we would need to put the Trustee on Notice on any potenial worker's comp claim. In addition, your Worker's comp attorney is required to be qualifed through the bankruptcy court. All of this is doable and depending on the gross Income in the household, we can either file a chapter 7 or a chapter 13. Also have to make sure you keep any and all tax refunds.

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