Are There Options Available Regarding The Debtor?s Secured
Consumer Loans?

If there are any consumer debts secured by property of the debtor?s estate, then there are several options available that must be exercised in the first 45 days after the bankruptcy filing; these are then reflected in the ?statement of intention? that is filed with the bankruptcy court.

• The debtor may surrender the collateral to the secured creditor and cease to make payments, effectively wiping out the debt.
• The debt may be formally reaffirmed in a written reaffirmation agreement, which is filed with the bankruptcy court. In this instance, the collateral is kept by the debtor and the debtor continues to make payments either on the full amount owed or some agreed-upon reduced amount; however, the debtor remains liable to the secured creditor in the event of payment default.
• The debtor may redeem the collateral by paying the ?fair market value? of the collateral to the secured creditor; or
• Cancel or avoid the lien, where the debtor keeps the property and ceases to make payments. This option is available only in rare circumstances where the debtor has secured a loan using household goods as collateral.

Finally, it is sometimes possible for the debtor to not officially reaffirm the debt, and yet retain the collateral and continue to make payments. In that case, the secured creditor will maintain the right to proceed with repossession of the collateral should the debtor default on the payments; however the creditor will not maintain the right to hold the debtor personally liable if the value of the collateral is insufficient to pay off the debt.