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How To Return Collateral To The Creditor During Bankruptcy

When you file for the protection of bankruptcy, you have choices to make about what to do with your property. If you are able to continue making payments on your secured debt, like your house or car, you can do so by reaffirming that debt. However, if your budget is too tight to allow you to continue paying for all of your secured debt, you can choose to surrender the property back to the lender. The logistics of giving back collateral during bankruptcy require some legal maneuvering, but it can be accomplished.

The most common way to return property to a lender while you are in bankruptcy is to notate on your statement of intention that you plan to surrender the item. The statement of intention is filed along with your initial bankruptcy petition, and your creditors will be able to learn your intent with regard to their collateral by reviewing what you have filed. Once the case is filed, you can expect the following with regard to property you do not plan on keeping:

  • The creditor will file a Motion to lift the automatic stay, so they can legally accept the surrender of property back to them.
  • You do not have to wait for the Motion to lift the automatic stay to be filed to being arrangements to sign over your house, or drop off your car. You can contact the creditor after filing and begin this process. In fact, it is best to get a bit ahead of the creditor in this regard so you do not run the risk of being “accused” of not following through with what your statement of intention says you will be doing.

Our office handles all of the contact with the creditor, unless you prefer to have a one on one conversation. The best approach is to keep the property in good condition, and communicate your desire to return the property to the lender as soon as possible. If a lender is difficult to contact or is non-responsive to your intentions to surrender, we can take action for you within your case. The last thing you want to do is to continue insuring property that you no longer wish to own, and we can help make sure this doesn’t happen.


If you have questions about finances and bankruptcy, contact us at We will help by coming up with solutions that work for you.

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