Chapter 7 Bankruptcy: Redemption

09 Sep 2010

If you owe $20,000 on a car, and the car is only worth $10,000, wouldn’t it be cool to only have to pay $10,000 on the car?

By redeeming the car in a Chapter 7 bankruptcy, that’s exactly what you can do!  As an Orlando bankruptcy attorney, I have helped dozens of clients over the last 10 years shed thousands of dollars of “negative equity” in their vehicles by filing a Motion to Redeem the vehicle in their Chapter 7 case.

Sometimes, as consumers, we get the short end of the stick.  Sometimes we are at the mercy of a less than perfect credit score when we in the market for a new car that results in a bad deal on a car loan.  Other times, you may be carrying a loan on a car when you go in to buy another car and the oh so kind dealer says he can just “pay off” that loan when you sign up for the new car loan.  How nice of him, right?

used-car-salesman-bankruptcy

Wrong!

By rolling over that old car loan into the new one, you create negative equity in the new car.  So, for example, let’s say the new car is worth $10,000 when you drive it off the lot.  You owed $10,000 on your previous car loan.  When you drive off the lot now, you owe $20,000 or more on a car that’s worth half that value.  It could take you years to get out of this negative equity loop you just created.

Now, let’s also assume you have some credit card debt you’ve been struggling with and some medical bills that you don’t think you’ll ever be able to pay off on your $40,000/yr salary.  Your thinking about filing bankruptcy and decide to call an Orlando bankruptcy attorney to see what options you may have.

Let’s further assume, for the sake of this story, l that the Orlando bankruptcy attorney you choose to call is me🙂

I would advise that you file a Chapter 7 bankruptcy to eliminate the credit card debt, wipe out the medical bills, and Redeem the car to shave off over $10,000 on the car loan.  A Redemption requires that you pay a lump sum amount to the creditor based on what the fair market value of the car is at the time of you filing bankruptcy.  I would file that Motion as your bankruptcy attorney in your case.

Because most of my clients don’t have $10,000 of spare change laying around when they file bankruptcy, sometimes it’s necessary to work with a bank to fund the loan.  Here’s a good website that explains exactly how the process works. I’ve worked with the folks at 722 in the past and achieved excellent results for my clients.

As an Orlando bankruptcy attorney, I’ve advised clients to Redeem lots of property over the years, not just cars.  I’ve Redeemed water softener systems for $100, electronic equipment for a few bucks, and so on.  When you call me, ask about how I can help you with debt you may owe to Credit Unions by redeeming property in which the credit union may have taken a security interest.

While Redeeming property in bankruptcy is a great way to save money, it’s not always a good move for everyone.  When you call an experienced Orlando bankruptcy attorney to discuss your specific situation, I can let you know pretty quickly if redemption is a good deal for you or not.

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K. Hunter Goff

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