When a homeowner files for Chapter 7 bankruptcy protection, the very first page of the bankruptcy filing that the mortgage company turns to is the Statement of Intention. The Statement of Intention (or Statement of Intent) discloses the debtor’s intention toward secured property, like cars and homes. In the Statement of Intention, the debtor states whether he or she wants to surrender or retain the property.
If you retain the property, you may want to either “reaffirm” the mortgage and or simply continue payments. If you surrender the home, the mortgage balance will be discharged and you will have to vacate the property. Vehicle financiers and other secured creditors are also listed along with mortgage companies. Leases are listed in a separate section.
What Is Contained in the Statement of Intention?
The Statement of Intention requires the debtor to state whether:
(1) the property will be surrendered or retained;
(2) the property has been exempted under applicable law; and
(3) the debtor intends to reaffirm the debt secured by the property.
The Statement of Intention must be filed within thirty days after the debtor files a Chapter 7 or before the Meeting of Creditors, whichever is earlier. The statement must be served on the trustee and each creditor named in the statement. The debtor may file an amended statement at any time before the time period for performance of the intention expires.
For those homeowners with missed payments, Chapter 13 bankruptcy may be a better option. Chapter 13 allows the debtor to cure the arrearage over the course of three to five years. You are not required to file a Statement of Intention in a Chapter 13 bankruptcy.
Long-term secured debts like mortgages, however, will pass through a Chapter 7 bankruptcy unaffected by the discharge. After all, mortgage companies are delighted to continue receiving payments from Chapter 7 debtors, as long as they pay in full and on time.