Introduction — three practical choices and why they matter
When a debt is secured by property (a car, appliances, or a home), a consumer bankruptcy filer typically faces three basic options: reaffirm the debt, surrender the collateral, or redeem the property. Each choice has distinct legal consequences for your personal liability, the creditor’s lien, and whether you keep the asset.
This article explains how those options work in Chapter 7 and Chapter 13, highlights key deadlines and procedural rules, compares the practical tradeoffs, and points to recent Ninth Circuit guidance affecting Chapter 13 mortgage treatments. It is intended as practical information — not legal advice — and you should consult a qualified bankruptcy attorney or the trustee about your specific case.
Reaffirmation agreements — what they are and when to consider them
What it is: A reaffirmation agreement is a voluntary contract between a debtor and a secured creditor in which the debtor agrees to remain personally liable for a debt that otherwise would be discharged. Reaffirmations are governed by 11 U.S.C. §524 and Federal Rule of Bankruptcy Procedure 4008, and most courts require specific forms and disclosures.
Key features and rules:
- You are never required to reaffirm — it is voluntary. If you reaffirm, the debt will not be discharged and the creditor can pursue you personally for repayment after the case ends.
- Timing and forms: Reaffirmation documents generally must be filed within the deadline set by FRBP 4008 (typically within 60 days after the first §341 meeting unless extended). Local bankruptcy rules add required cover sheets and supporting statements; in the Central District of California the court posts specific instructions and local rule references.
- Attorney involvement and approval: If you were represented by counsel while negotiating the reaffirmation, an attorney’s declaration may make court approval unnecessary; if you negotiated it pro se (without counsel), the court will usually require a hearing to determine whether the reaffirmation is in your best interest. You have a statutory right to rescind (cancel) a reaffirmation in a limited time window.
Practical pros and cons:
- Pros: Reaffirmation is commonly used to keep a car when the lender requires a personal guarantee or to preserve favorable loan terms that a creditor will not offer outside of reaffirmation.
- Cons: You remain personally liable; missed payments after discharge can lead to repossession and a post-bankruptcy deficiency judgment (if state law permits). Consider whether you can truly afford the payments long-term.
Tip: Before signing, ask for the agreement in writing, compare the reaffirmation payment/term to your original loan, confirm the right-to-rescind window, and get legal advice about whether reaffirming improves your position overall.
Redemption and surrender — how to give up or buy back collateral
Redemption (Chapter 7): Under 11 U.S.C. §722 a Chapter 7 debtor may redeem tangible personal property intended primarily for personal, family, or household use (commonly a car) by paying the lienholder the allowed secured claim — essentially the creditor’s secured claim value determined by the court or agreed parties. Redemption requires that the debtor’s interest be exempt or the trustee has abandoned the property. Redemption is a lump-sum payment (or court-approved financing) equal to the amount of the allowed secured claim.
Practical points about redemption:
- Redemption is most useful when the collateral’s current value is much lower than the loan balance — you pay market value rather than the loan balance.
- Redemption applies to personal property (vehicles, appliances), not real estate mortgages. The payment is typically required in a single lump sum unless the court approves alternate terms.
Surrender: To surrender means you relinquish the collateral to the secured creditor. In Chapter 7, surrendering personal or real property generally relieves you of personal liability on that debt (the discharged portion becomes unsecured and is discharged). In Chapter 13, surrender is accomplished by addressing the secured claim in the plan — the creditor may sell or repossess the collateral and often may file a proof of unsecured deficiency claim for any unpaid balance not covered by the sale. Surrender requires the debtor to refrain from acts that would impede the creditor’s ability to repossess or foreclose.
What to expect after surrender:
- Creditors may choose whether and when to repossess or foreclose; they are not required to immediately take possession. Even if they do not repossess, the lien survives until satisfied — but you will not legally owe the discharged deficiency after a Chapter 7 discharge. In Chapter 13, deficiency claims may be treated in the plan.
Checklist: If you plan to redeem, confirm the property is eligible (personal use, exempt/abandoned) and prepare for a court valuation and a lump-sum payment; if you plan to surrender, confirm whether you must take any specific steps in your schedules/statement of intention to avoid post-petition disputes.
Comparing the choices in Chapter 7 vs Chapter 13 — practical guidance and recent Ninth Circuit context
Chapter 7 — common patterns
- Reaffirmation: Often used when you need to keep a vehicle and the lender requires a personal promise. It preserves the creditor’s rights and keeps you personally liable. Deadlines and forms under FRBP 4008 apply.
- Redemption: Useful for cars and other personal property when the market value is significantly below the loan balance — you can pay the allowed secured claim (market value) and keep the asset.
- Surrender: If the asset is underwater and you don’t want it, surrendering lets you walk away; the secured claim becomes unsecured and is typically discharged. Be aware of the practical timing of repossession or foreclosure.
Chapter 13 — different mechanics, more flexibility
- Chapter 13 resolves secured claims in the repayment plan. You can propose to keep property by curing arrears and continuing regular contract payments, strip junior liens in certain situations, or (for eligible collateral) use a cramdown to reduce the secured amount to the collateral’s value. In short, Chapter 13 is often the vehicle to keep an asset while restructuring the secured claim.
- Reaffirmation is less common in Chapter 13 because the plan itself provides relief and payment structures for secured claims, but reaffirmation remains legally available in some settings. Consult local practice and your attorney.
Important recent Ninth Circuit development: In 2025 the Ninth Circuit in Mission Hen v. Lee clarified that §1322(c)(2) can permit bifurcation and cramdown of a junior mortgage on a principal residence when the mortgage matures during the plan term — an important, case-specific exception to the general prohibition on modifying primary-residence mortgages. This decision affects debtors in the Ninth Circuit (including California) but is applied based on the facts of each case and the plan’s feasibility; cramdowns still have practical constraints (e.g., payment term/plan length). If you’re in Los Angeles County or elsewhere in the Ninth Circuit, discuss this possibility with counsel — it may open options for some Chapter 13 filers.
Decision factors — short checklist for choosing:
| Question | If yes, consider... |
|---|---|
| Can you afford to keep paying under the loan? | Reaffirm (Chapter 7) or keep in plan (Chapter 13) if affordable; get post-discharge ability analysis. |
| Is the collateral personal property and worth much less than the loan? | Redemption in Chapter 7 can let you pay market value and keep it. |
| Do you want to walk away completely? | Surrender in Chapter 7 often gives the cleanest fresh start; in Chapter 13 surrender is done through the plan and deficiency treatment differs. |
| Is the loan a junior mortgage on your home that matures during the plan? | In the Ninth Circuit, you may have a cramdown pathway under Mission Hen — analyze feasibility and plan mechanics with counsel. |
Practical next steps: Review your schedules, identify secured creditors and collateral, compute likely redemption value, check exemption options, decide whether you will list a Statement of Intention (Chapter 7) or propose plan treatment (Chapter 13), and talk to your Chapter 7 trustee or Chapter 13 trustee and a local bankruptcy attorney before signing or filing anything.
Conclusion — balancing legal effect and personal goals
Your choice to reaffirm, surrender, or redeem should match your long-term ability to pay, your need for the property (commute, work, family), and your comfort with remaining personally liable after bankruptcy. Chapter 7 gives quick discharge possibilities and clear-cut redemption/surrender rules for personal property; Chapter 13 gives more options for restructuring secured debt but requires plan feasibility and payments over time. Recent Ninth Circuit decisions have added nuance for some home-mortgage situations in Chapter 13 — another reason to seek local legal advice.
Where to get help: Contact a California bankruptcy attorney or local legal aid clinic, review Central District of California guidance on reaffirmation and local filing requirements, and raise any idea about cramdown or redemption early so your schedules and plan (if any) document the intended treatment.
Disclaimer: This article provides general information only and does not create an attorney–client relationship. For advice specific to your facts and Los Angeles practice variations, consult a licensed bankruptcy attorney.