Post bankruptcy negotiation with secured lenders.

When you file bankruptcy you can elect to keep or give back certain property like cars, furniture, jewelry and computers that was bought on credit and were the creditor retained a “security interest” in the property.

In other words the lender has the right to repossess the property if you fail to pay. But when you file bankruptcy you elect (Statement of Intention) whether you keep the property or not.

This is a big part of the counseling that we do with our client right before they file: deciding whether to keep property that maybe you can’t afford. When you sign your bankruptcy petition you advise the creditor whether or not you are going to surrender or retain the property.

If you elect to keep or surrender the property, this opens up the possibility to renegotiate with your lender. Whether you keep the property or not, and as the old saying goes, everything is negotiable.

Lenders of certain types of property do not want their “security” (i.e. property) back, and even if you want to keep the property they will entertain the possible renegotiation of the loan amount or a cash buyout.

Your bargaining ability increases if your willing to walk away from the property and you let the lender know this, but suggest an alternative buy-out for a small percent on the dollar or new terms.

If they don’t agree, call their loss mitigation/repossession department and ask that their property be picked up. Sometime with older merchandise they never even bother to pick up the property. For example, even though you may owe several thousand dollars on some 3 year old furniture, it is a good bet that the furniture is not worth what is owed and some lenders have been known just to walk away – you get to keep the property and discharge the debt.

Understanding what the lender position is as you enter bankruptcy is often the keystone to post-bankruptcy negotiations of new terms or small percentage buy-outs. Talk with your lawyer about this strategy and approach the lender with an open mind. With other types of secured property (cars, leased construction equipment) the lenders are often less flexible. But it never hurts to ask.

Disclaimer

Fresno-Bankruptcy-Lawfirm.com is owned by the Law Offices of Jeffery D. Rowe. We are a debt relief agency. We help people file for bankruptcy relief under the Federal  Bankruptcy Code (Title 11 of the United States Code). If you would like to discuss your situation in further detail, please call our offices at: (559) 228-1500 to schedule a consultation.