The Statement of Intention in a Chapter 7 Case

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When a debtor files Chapter 7 bankruptcy, the debtor completes a Statement of Intention.  The Statement of Intention is a form that lets the court, trustee, and creditors know what the debtor intends to do with secured collateral.  Examples of secured collateral include a house, car, boat or motorcycle.  A secured debt is a type of debt creditors can repossess, both personal or real property.

Stating Your "Intention" at the Bankruptcy Hearing

At the 341 hearing, the trustee may ask the debtor’s attorney or the debtor if the debtor has performed on the Statement of Intention.  The debtor can say s/he plans to keep the house or car, and answer whether s/he is continuing to pay the debt.

The 341 meeting is where the trustee asks the debtor on the completeness of the bankruptcy petition and any changes in life since the bankruptcy filing that affect the debtor’s assets and liabilities. 

The Options You Have with Regard to Collateral in Bankruptcy

The Statement of Intention also applies to property the debtor does not own like leases. It requires the debtor to say whether:

  1. Property will be surrendered
  2. Property will be claimed as exempt, meaning the property is not to be taken for sale by the trustee
  3. The debtor plans to redeem the property, and
  4. The debtor plans to reaffirm the debt secured by the property. 

Surrendered means to turn over to the trustee for sale, and this usually happens when the debt is more than the market value of the property, or the debtor is not able to payoff the debt. 

To reaffirm debt, the debtor continues payment on the debt after filing bankruptcy.

In order to redeem the property, the debtor must come up with the equivalent value of the property in one lump sum.

How to Value the Property

When the debtor puts down the property value in the bankruptcy petition, the debtor must use the market value from well known resources, such as the Blue Book for cars.  When a debtor undervalues property, it may affect the amount of property the debtor may keep or consider as exempt. 

The trustee may ask the debtor at a 341 meeting how the debtor estimated the value for property, and how to account for any equity from the difference between the market value and the debtor’s estimated value. If the trustee does not agree with the debtor’s estimate, the trustee can engage an appraiser for the property.  Equity must be classified as exempt or non-exempt.

Who Get's the Statement of Intention

The Statement of Intention must be filed with the court, and served on the trustee and each creditor.  A debtor may change the intention, and file an amended statement before the time period for performance of the intention expires.