When filing for Chapter 7 bankruptcy, debtors must fill out a statement of intention form. In this article, we’ll define “statement of intention.”
- A statement of intention form is used by a debtor filing for Chapter 7 bankruptcy to inform the bankruptcy court about what they intend to do with their secured or leased property
- The four options a debtor has for their secured or leased property are to surrender it, redeem it, retain it, or reaffirm the debt
- Debtor must file their statement of intention by the 30-day deadline, or by the date of their 341 meeting, or the creditor will regain the right to repossess the property
What Is a Statement of Intention?
When an individual files for Chapter 7 bankruptcy, they must fill out a statement of intention form, officially called the Statement of Intention for Individuals Filing Under Chapter 7. This form is used for the debtor to inform the bankruptcy court about what they intend to do with their secured or leased property - keep it or turn it over to the creditor.
According to the rules of Chapter 7 bankruptcy, a debtor may keep their secured or leased property such as their car or home as long as they continue making payments. The statement of intention form clarifies to a bankrupt debtor’s creditors whether they are going to keep the property, surrender it, buy it, or pursue other options.
Terminology Used on the Statement of Intention Form
There are four options listed on the statement of intention form for what a debtor may do with a property: surrender it, reaffirm the debt, retain the property, or redeem the property. Here is what each of these means.
- Surrender the property - This means giving the property back to the creditor. This option is recommended if the debtor doesn't need the property, can’t afford the payment, or the property is worth less than they owe.
- Reaffirm the debt - This means entering into a new contract with the creditor to continue leasing the property. Debtors most often choose this if the property is still something they need. As part of the process of reaffirming a debt, debtors can stick to the same terms or negotiate new terms. To reaffirm a debt, debtors need to file a reaffirmation agreement and attend a hearing before their case is over.
- Redeem the property - This means buying the property back from the creditor by either paying what the debtor still owes on the debt or paying the replacement value of the property, whichever is less. This option is rarely used because most bankrupt debtors cannot afford it. This approach can’t be used for business property, real estate, or intangible property. To redeem property, debtors must file a motion with the bankruptcy court.
- Retain the property - This means that the debtor can keep the property without reaffirming or redeeming as long as they remain current on their payments. The creditor retains the right to repossess the property at any time.
Filing a Statement of Intention
Debtors must file the statement of intention form with the court and deliver it to their creditors (or whomever holds the debtor’s lease) within 30 days of filing for bankruptcy or by the first date set for their meeting of creditors - whichever comes first. If the debtor doesn’t file the statement of intention in time, they may lose their property, as the creditor regains the right to repossess it.