During the bankruptcy process, the bankruptcy court determines which assets the individual should retain and which should be sold to repay creditors. However, there are numerous ways to protect assets, including leases and contracts, after the bankruptcy process. Debt discharge is dependent on what the debtor wishes to do with the property.
Keeping Assets
In situations where the debtor wishes to keep an asset, such as a lease or a contract, after the bankruptcy process, the individual needs to reaffirm these agreements. To reaffirm these contracts, individuals need to:
- Get the approval of the creditor holding the contract or lease
- Get caught up and remain caught up on any of the debt owed on that lease or contract to keep the debt in good standing with the lender
- Sign a document agreeing to continue to repay the debt according to the original terms of the agreement, unless both parties agree on another solution.
The bankruptcy court is unlikely to take these assets from a debtor of both parties agree the agreement. The debtor must have the ability to continue repaying the debt. If he or she does not, it may be best to get debt discharge for the lease and contracts.
Disposing Of Assets
In some situations, the debtor may wish to be released from the leases and contracts held prior to filing bankruptcy. If an individual wishes to get out of a lease on a vehicle, for example, it may be part of the bankruptcy discharge, though the vehicle is lost in the process. If a business wishes to get out of a contract for a commercial property, it may be included in the bankruptcy discharge, especially if the debtor’s business would be financially strained to remain in such a contract.
In situations where the individual is unable to repay the debt or wishes to break the contract, this may occur in the bankruptcy process. In Chapter 13 bankruptcy, some of these debts may be reorganized to allow the debtor to keep them while making payments more affordable. Giving up the property, though, is something many will need to if the debt discharge occurs.
Hiring An Attorney
The process of getting out of a lease or contract is highly dependent on bankruptcy documentation and proving the case. It is always a good idea to work with an attorney to ensure the process goes smoothly to ensure that the debt discharge occurs as the debtor wishes.
