How to Surrender Property in Bankruptcy
- 1). Familiarize yourself with, and understand the difference between, a Chapter 7 and a Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, your debt is discharged. Through a Chapter 13 case, a payment plan is developed through which you pay off the money owed to your creditors. The manner in which property is surrendered differs in a Chapter 7 and 13 proceeding.
- 2). Decline to sign a reaffirmation agreement if you want to surrender property in a Chapter 7 case. Under the provisions of the U.S. Bankruptcy Code governing a Chapter 7 case, you have the right to enter into a reaffirmation agreement with a creditor that has a lien on property you own. A reaffirmation agreement allows you the ability to keep the property and pay off the outstanding balance due and owing on the associated loan. In other words, if you reaffirm, that particular debt is not discharged. If you want to surrender the property, you simply do not enter into a reaffirmation agreement. You make arrangements directly with the creditor to return the property.
- 3). In the case of a Chapter 13 bankruptcy, notify the Chapter 13 bankruptcy trustee that you do not want to keep a particular piece of property-real estate, a car or another type of personal property subject to a lien and a loan. You need to make this notification early on in the case, and in advance of the development of a Chapter 13 repayment plan. Because you want to surrender the property, you do not want it included in the plan. As in the case of Chapter 7, make arrangements directly with the creditor to return the property in question.
- 4). Enter into a specific written agreement with the creditor to surrender property in a Chapter 13 case. This agreement is provided to the bankruptcy trustee. The bankruptcy trustee will have a standard form that you can use for this purpose.
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