We have $50,000 in debt that we may file Chp7 on, but we don’t want to file on a tractor we bought last year.

Question

We would like to continue to make payments on it and keep it because we need it for our property. The home & 1 acre is in my name because I lived here before my husband and I married. We use the tractor for property maintenance and feeding our cows. (We have 2 that are being raised for our meat source). My mother owns 24 acres beside mine and we use the tractor for her property maintenance as well. Can we file on all the other debt but not on this John Deere tractor loan?

John Robinson · Answer

Great question, and one that I frequently field from potential filers. The John Deere Finance loan will have to be identified in the bankruptcy schedules. This ABSOLUTELY does NOT mean that you have to give up the tractor. There are multiple paths available to keep the tractor. One path, reaffirmation, would involve you signing a new contract (a "reaffirmation" agreement) as part of the bankruptcy case. When you reaffirm a debt you sign a new contract with the creditor. Typically the terms of a reaffirmation are the exact same as the original/current contract. When you "reaffirm" you re-obligate yourself on the account as if you did not file as to that particular debt. 
 
The second path forward is commonly referred to as a "ride-through." When you ride-through, you simply continue to make the payments. The creditor applies the payments in accordance with the terms of the contract, and releases any lien/security interest when all payments are made. When you ride-through, you do not re-obligate yourself. This means that if something happens after the BK and you do not want the property or are unable to make the payments, you simply surrender the tractor to John Deere Finance. John Deere would not be able to pursue you for any more money if the collateral doesn't sell for enough to pay the account in full after you surrender it. 
 
Thanks for the question and best of luck along your financial path.

W. J. Winterstein Jr. · Answer

When you file a bankruptcy petition, the accompanying Schedules ask for ALL your assets (the Section 541 definition of "estate" is quite broad) and ALL your debts/claims against you.  You sign those Schedules under penalty of perjury (it's a felony, and the penalty is steep).   
Never exchange a debt issue for criminal liability. 
You have options with respect to property subject to a lien in bankruptcy.  You can retain the collateral (your tractor) and pay off the debt in accordance with the debt/Note terms and amortization schedule.  Most creditors are delighted when you choose to pay off/reaffirm the debt.

Timothy Denison · Answer

You must list all assets and debts including the tractor.  However, you can reaffirm the debt and keep the tractor after the bankruptcy is filed.

Q: We have $50,000 in debt that we may file Chp7 on, but we don’t want to file on a tractor we bought last year.