What is statement of intention: Reaffirmation, Redemption, Surrender, Other?

What is a statement of intention when it comes to secured property in bankruptcy code?

In every exempted property, the debtor likes to keep after bankruptcy, they have to file a statement of intention. Section 521(a) (2) requires the debtor in chapter 7 cases to file a statement of certain intentions with respect to property securing debts and with respect to personal property leases. The debtor need not state his or her plan on this statement. All that is required is a statement:

(i)whether the debtor intends to retain or surrender the collateral,
(ii) whether it is claimed as exempt, and
(iii) whether the debtor intends to reaffirm the debt.

However, the debtor is not required to choose redemption, surrender, or reaffirmation in every case. The debtor may choose other options besides those listed on the form. In practice, the choice of Other is commonly used in Nevada. It has different ramifications which can be discussed only with a qualified bankruptcy attorney. A debtor may also choose to simply continue paying an automobile loan without either redeeming or reaffirming the debt. With respect to leases of personal property, the debtor must state whether the debtor intends to assume the lease.

Duration of Filing: The statement of intention must be filed within thirty days of the filing of a chapter 7 petition or on or before the date of the meeting of the creditors, whichever is earlier. The statement must be served on trustee and all creditors named in the statement on or before the date it is filed. Thereafter he debtor may amend it as of right at any time up to the time when performance is to take place under Code section 521(2(B). Section 521((2) also requires that the debtor “shall perform his intention,” within thirty days after the first date set for the meeting of creditor or such additional time as the court for cause within that period allow. In most cases this is quite simple, if the debtor states intent to retain exempt property that has long since been accomplished. If the debtor’s intention is to surrender the property, there is no requirement to deliver it or to execute a deed to effectuate the surrender, because the Code provisions was not designed to provide a substitute for normal state proceedings to enforce a creditor’s rights to collateral.

Although the chapter 7 trustee is supposed to “ensure that the debtor shall perform” the stated intention, the Code provides no mechanism for the trustee to use. The statement of intention thus seems designed primarily as a way for secured creditors to obtain notice of what the debtor plan to do, and as a guideline to when redemption and reaffirmation should occur. However, because substantive rights are expressly left unaffected, the debtor change his or her mind about what is planned and apparently would not have to file a new statement of that happened.

Is there any sanctions if debtor does not follow his statement of intention?
There are no sanctions provided for failing to carry through on stated intention’s however that conduct would give a secured creditor an additional argument in seeking relief from the automatic stay, or it may result in the termination of the automatic stay with respect to certain personal property.

The debtor has other options in addition to reaffirmation, redemption, or surrender under the Code.

What is the right of redemption in chapter 7?The Code also provides that for certain secured consumer debts the security interest may be eliminated upon payment to the creditor of the value of its collateral. The purpose of this section is to avoid creditors taking an unfair advantage of the debtor’s situation. The redemption provision provides a simple procedure, within the chapter 7 case, for the debtor ro remove a creditor’s lien by paying the creditor the real value of the property. This is available to only individual debtor and only with respect to certain property and certain debts.

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