Legal Question in Bankruptcy in Arizona

Bankruptcy discharge: which debts?

Technically, a bankruptcy discharge applies to all debts. However, you may "reaffirm" any debt you wish to continue paying and your "reaffirmation agreement" is enforceable after the bankruptcy discharge. When you file, you must include a schedule indicating what you intend to do with respect to secured debts (cars, homes, other big items): reaffirm, redeem or surrender. If you reaffirm, you agree to pay the debt, the discharge notwithstanding. If you redeem, you pay the creditor the present market value of the security, if the market value is less than the balance due; if you surrender, you give the security back to the creditor. With a big ticket item such as real estate, if there is any equity of redemption, your better choice is to put the real estate on the market and see whether you can realize more than the balance due from a sale. If you file a Chapter 7, the trustee can have the home appraised and decide to sell it rather than permit you to surrender it so there will be proceeds to distribute to other creditors.

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