Official Form 108: Understanding the Statement of Intention

As part of my series on the bankruptcy petition, this article’s focus is on Official Form 108: The Statement of Intention. While this form is relatively brief, it is a critical requirement for any individual debtor with secured debts or unexpired leases.

In simple terms, the Statement of Intention tells the Court, the Bankruptcy Trustee, and your creditors exactly what you plan to do with your secured assets, like your home or your car.

Listen: The Professor’s Audio Briefing.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways: Official Form 108: Statement of Intention

• The Statement of Intention’s Purpose: This form serves as your formal declaration to the Court and creditors regarding what you plan to do with collateralized property (like a car or home) and unexpired leases.
• Three Primary Options: For secured assets, you must generally choose to Surrender the property, Reaffirm the debt (signing a new contract to keep the asset), or Redeem the asset by paying its fair market value in a lump sum.
• The Role of the Attorney: Your lawyer must certify that a Reaffirmation Agreement doesn’t cause “undue hardship.” If they decline to sign due to budget or valuation concerns, a judge will review the agreement at a hearing.
• Consequences of Inaccuracy: Failing to properly complete Form 108 can lead to creditor motions to compel, delays in your discharge, or potential issues with the bankruptcy trustee regarding your exempt assets.

The Three Primary Choices for Secured Assets

When you list a secured debt, such as a vehicle loan, you generally have three options to choose from on Form 108:

Option 1- Surrender: You give the property back to the creditor. This is common when you can no longer afford the payments or the asset is “upside down,” meaning you owe more than it’s worth, and it’s not to your financial benefit to keep the property.

Professor’s Note: If you surrender a vehicle, any remaining balance after the auction is treated as unsecured debt. I recommend listing this as an “estimated deficiency balance” on Schedule F to ensure that potential debt is fully discharged.

Option 2- Reaffirmation: You sign a new contract to remain legally liable for the debt. This allows you to keep the asset, provided you stay current on payments.

Option 3- Redemption (Retain and Redeem): This involves paying the creditor the current fair market value of the property in one lump sum. While this sounds ideal, it is rare in practice because most debtors do not have the liquid cash available to “buy out” their car or home during a filing.

The Reality of Reaffirmation Agreements

Reaffirmation Agreements are often the most misunderstood part of the process. Some bankruptcy attorneys refuse to sign them, leaving clients to handle the process on their own.

Why Lawyers Decline to Sign Reaffirmation Agreements

Under the Bankruptcy Code, an attorney must certify that the reaffirmation does not impose an “undue hardship” on the debtor. If a client’s budget is tight or the vehicle is significantly overvalued, a lawyer could face liability for signing off on a bad financial deal.

If your lawyer declines to sign, don’t panic. It simply means the Bankruptcy Judge will hold a hearing to personally review the agreement and ensure that keeping the debt is in your best interest.

Reviewing Reaffirmation Agreements

For a deep dive on Reaffirmation Agreements, make sure to review my comprehensive series that includes:

• Creditor Pressure Tactics: Identifying the aggressive methods used to push for a signed agreement.
• Attorney Perspective: Understanding the legal and ethical reasons why your bankruptcy attorney may decline to sign the Reaffirmation.
• Credit Reporting Realities: Why many creditors refuse to report your timely payments to the credit bureaus (Equifax, Experian, and TransUnion).

Accuracy is Mandatory

The bankruptcy petition is a lengthy, time-consuming document. It is remarkably easy to miss a checkbox on the Statement of Intention, but failing to declare your intent can lead to a “Motion to Compel” from your creditors, delays in your discharge, and if your property is exempt and not clearly marked, it could result in the bankruptcy trustee trying to sell the asset.

Professor’s Tip: Whether you are keeping your home or vehicle, every asset must be accounted for with 100% accuracy, even if you are keeping the asset.

The Professor’s Conclusion

Accuracy on the Statement of Intention is not just a procedural formality; it is a shield for your assets. Whether you are surrendering a high-interest auto loan to start fresh or keeping your family home, how you fill out this form dictates how the bankruptcy trustees and creditors react to your filing.

Don’t let a missed checkbox or a misunderstood reaffirmation agreement jeopardize your discharge. Take the time to review every entry, consult with your bankruptcy lawyer on the risks of reaffirmation agreements, and ensure your intentions are clear and filed on time.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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