Massachusetts Bankruptcy Statement of Intentions

On the Massachusetts bankruptcy form there is a whole section regarding the Statement of Intention with respect to secured debts. Secured debts are debts that are secured by the “thing” they financed. This typically includes homes and cars.

The bankruptcy petition gives you four choices. The first is surrender. If you declare that you intend to surrender the secured property, you have sworn that that is your intention at the time you signed the Petition. Things change. So, if you were denied in a refinance application by your mortgage lender, filed the Petition, and then another lender offered you a mortgage that works, you can refinance with that new lender without any significant consequence to your bankruptcy. If you intend to surrender your motor vehicle, you may stop making loan payments but you must continue to insure the vehicle until the lender physically takes it back.
 
The second option is redeem. To redeem is to pay off a loan for the market value of the property. However, this does not work with a home or any other real estate interest. Nor does it work in a typical Chapter 7 personal bankruptcy.
 
The third option is to reaffirm. This option allows you to reaffirm that you will pay the debt, that you have the ability to pay the debt, and that you wish to keep the secured item such as the motor vehicle or home. This requires you to sign a document called a reaffirmation agreement in which you agree to repay the debt that would otherwise be discharged in the personal bankruptcy. Do you have to reaffirm if you want to keep the home or car. No, our legal analysis for most clients is to simply keep paying the loan, however, if the lender demands a reaffirmation agreement or they will repossess, you may have no choice. But in most cases we do recommend that you contact your lender to see how they will react to the bankruptcy when you want to reaffirm the loan.
 
The fourth option is entitled “other” which could mean many things. For example, you could state that you are attempting a loan modification. However, be careful, in a chapter 7 personal bankruptcy, the bankruptcy court is not going to force, or even encourage, the lender to restructure a loan. However, to your credit, if you make the payments and the loan is not successfully restructured, you can walk away and discharge the debt if you act under this section following a Massachusetts bankruptcy. The negative here is that if you have not reaffirmed, and you do pay, your “new” payment history is not reported on the credit report – because you are not really committed to it from their perspective.
 
This is usually a straightforward part of the Petition. However, it is important for Massachusetts bankruptcy attorneys to prepare it accurately for you because you do not want to mislead the Bankruptcy Trustee or the Court. While working on the refinance of a home can take time, and frequently takes more time (these days) than the bankruptcy process, the decision with respect to a motor vehicle usually comes down to a very practical decision: is it worth keeping the vehicle factoring in the amount owed, the monthly payment and the cost of securing a different vehicle.