Statement of Intention in Chapter 7 Bankruptcy – No Free Cars

In Chapter 7 bankruptcy, there are tons of documents and forms to fill out. One of them is the Statement of Intention.

What is the Statement of Intention

A statement of intention is where you… state… your… intention

The Statement of Intention is where you state… your… intentions. Yes, you knew that, but about what?  You’ve already declared bankruptcy. Not literally, though you can if that helps. Isn’t declaring your bankruptcy a statement of your intention to ditch your debt? Yes, it is.

But the bankruptcy Statement of Intention is regarding not just all your debts. You already declared those. This is only about the secured debts. The debts with security. The debts with collateral.

You don’t get a free car, and other bankruptcy myths

You see, when you declare bankruptcy, you must list all your debts. All means all. “But I want to keep my car in bankruptcy,” you exclaim (or declare).  And you can, usually. But you must keep making payments for it. And since all debts are in the bankruptcy, even your home mortgage and car loan, you need to tell them what your plans are.

What are my secured debt options?

The Statement of Intention is a form where you tell your secured debts what you’re doing with them. Are you keeping the car and willing to be stuck with the loan? Or ditching that high mortgage and being done with the house forever. The choice is yours.

Generally speaking, your options are to keep both or lose both. More specifically, your choice is to:

• keep the house and keep making payments
• keep the car and reaffirm the debt
• surrender the house or car
• redeem the debt

Note: by choosing the second option, you’re inviting the car lender to send you a reaffirmation agreement. That’s going to bind you to the loan past the bankruptcy. But just stating you intend to reaffirm debt isn’t reaffirming debt. That is, the Statement of Intention isn’t the Reaffirmation Agreement.

When you complete the Statement of Intention, there’s a deadline when you have to do what you said you’d do.

In short, when you declare bankruptcy, you state your intention about whether you’ll reaffirm debt.