{"id":3282,"date":"2016-08-25T07:00:14","date_gmt":"2016-08-25T12:00:14","guid":{"rendered":"https:\/\/nybankruptcy.net\/main\/?p=3282"},"modified":"2018-08-08T01:39:35","modified_gmt":"2018-08-08T01:39:35","slug":"post-bankruptcy-non-recourse-debts-good-idea","status":"publish","type":"post","link":"https:\/\/nybankruptcy.net\/main\/post-bankruptcy-non-recourse-debts-good-idea\/","title":{"rendered":"When Are Post-Bankruptcy Non-Recourse Debts a Good Idea?"},"content":{"rendered":"

The terms “recourse” or “non-recourse” usually relate to whether lenders can sue debtors for mortgage deficiencies after foreclosure. The state’s “election of remedies” rule complicates things somewhat, but the issue in New York bankruptcy is really what happens to secured debts that debtors continue to pay even after their personal obligation has been discharged.<\/p>\n

The Bankruptcy Code offers chapter 7 debtors with secured assets a handful of options for resolving those debts, and these options appear in a bankruptcy form<\/a> titled, “Statement of Individual Intention for Individuals Filing Under Chapter 7.” Debtors can surrender the properties<\/a> to the creditors and discharge the underlying loans. If they have the cash, they can redeem the properties in a lump sum payment to the creditors. They can sign reaffirmation agreements with the creditors. Or, they can retain the property and “[explain],” which usually means avoiding liens<\/a> on nonpossessory, nonpurchase-money security interests.<\/p>\n

Debtors can also simply choose to keep the property while repaying the debt on time without signing a reaffirmation agreement. This choice turns the debt into a “non-recourse” loan because the discharge order bars the secured creditor from suing the debtor on the debt. If the debtor falls behind on the payments, then the creditor can instead try to repossess the collateral.<\/p>\n

So when might debtors be better off holding on to secured properties while paying down non-recourse loans? Based on the benefits to the debtor, it’s usually when the loan is worth more to the creditor than the collateral is to the debtor. For example, a debtor might own an old used car but owe quite a bit on it. The debtor can run the car until it falls apart, and then simply return it to the creditor as scrap without finishing paying off the loan.<\/p>\n

For homeowner debtors, discharging underwater junior mortgages can lower their total unsecured debt levels to the point that they can strip the lien from the home in chapter 13. For discharged senior mortgages, debtors have the option of staying in the home for as long as they want it.<\/p>\n

The one drawback from keeping secured collateral with non-recourse loans is the impact (or not) on debtors’ credit scores. Because the debt was discharged, good payments on it won’t help debtors appear more creditworthy.<\/p>\n

Dealing with secured debts is a common factor in bankruptcies, so consulting with an experienced New York bankruptcy lawyer can help debtors decide the best way to resolve them.<\/p>\n

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.<\/p>\n","protected":false},"excerpt":{"rendered":"

The terms “recourse” or “non-recourse” usually relate to whether lenders can sue debtors for mortgage deficiencies after foreclosure. The state’s “election of remedies” rule complicates things somewhat, but the issue in New York bankruptcy is really what happens to secured debts that debtors continue to pay even after their personal obligation has been discharged. The …<\/p>\n

When Are Post-Bankruptcy Non-Recourse Debts a Good Idea?<\/span> Read More \u00bb<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":""},"categories":[16,22,31,7,14],"tags":[2,30,15,51,52],"acf":[],"yoast_head":"\nWhen Are Post-Bankruptcy Non-Recourse Debts a Good Idea? -<\/title>\n<meta name=\"description\" content=\"The terms "recourse" or "non-recourse" usually relate to whether lenders can sue debtors for mortgage deficiencies after foreclosure. 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