Creditors who retain a security interest in collateral (Secured creditors) are dealt with in one of three ways in chapter 7.

A creditor may send the debtor a Reaffirmation Agreement which legally binds you to continue paying on the account.  The law does NOT require debtors to sign Reaffirmation agreements and a debtors may revoke a Reaffirmation agreement at any time prior to the discharge, or within 60 days of filing with the court, whichever occurs later.  Reaffirmation agreements are subject to attorney approval.

A debtor may elect to enter into what is called a Redemption Agreement with the secured creditor.  A redemption is when a debtor pays one lump sum for the fair market value of the collateral in order to settle the account.  After the one lump sum payment is made, the debtor is no longer liable for the debt.

A debtor may also choose to surrender the collateral and owe nothing. Under the Bankruptcy Code, if collateral is surrendered, the debtor will not be liable for any difference should the creditor not be able to realize the balance of the account through resale of the collateral.