I need to replace this car for my wife. Almost always you recommit to paying the entire loan balance, … One of the options for keeping a car in a Chapter 7 Bankruptcy is to redeem the car. Then, there’s the security agreement. To redeem, you'd pay the trustee $5,000 to keep your vehicle free and clear. It is something you are allowed to do in Chapter 7 bankruptcy. If the value is significantly lower, it might be worth your while to pay off the value or to apply for redemption financing. A good settlement saves both parties the time and expense of further litigation, and that is often the outcome of a Motion to Redeem. If you chose to go through a redemption financing company, many times the new lender will finance the additional attorney’s fee, also. I am filing chapter 7. If your car is free and clear with no liens against it, the car's value becomes part of your estate. Keeping Your Car in Chapter 7 Bankruptcy. If you want to retain the vehicle in your Chapter 7 bankruptcy, you have two remaining choices: (1) reaffirmation of the vehicle loan, or (2) redemption. Redeem or Replace! For more information about reaffirming the debt, instead see the article What is a Reaffirmation Agreement? Redemption is not a rare occurrence, but it is usually not included in the standard fee that a bankruptcy attorney charges. Generally the interest may be higher due to the risk involved for the lender. It is one of the benefits of the process. Redemption allows you to keep your personal property for which you owe more than it’s worth by paying off the present fair market value instead of paying off the debt in full. Can I still redeem a car after discharge of Chapter 7? by Walter Metzen | Oct 29, 2019 | Detroit Bankruptcy Blog, There are various options available when you have a vehicle loan in bankruptcy. At the end of the day, the benefit of redemption in Chapter 7 is that it is not something you have to ask the creditor for at all. If you wish to redeem your vehicle in a Chapter 7 bankruptcy then you need to apply for a 722 redemption loan. The difference between those two figures is often significant. If the borrower does not pay, the lender has a right to repossess and sell the collateral to get back at least a portion of what is owed on the loan. 522(d)(2). Redemption is a process during a Chapter 7 bankruptcy case where a debtor is able to retain a vehicle by paying the secured creditor the value of the vehicle, not the total debt that is owed. In this instance, your claim is that the vehicle is worth only $X.XX, as opposed to whatever the balance of the loan is. What Happens When I File Bankruptcy After I Have Been Sued? The debt is a consumer debt on goods used for personal or household purposes. The old lender will release the old lien, and you will now be liable to the new lender on your new loan. Compare the value of your car with the amount your lender says you owe. Personal property is all property other than real estate. Two good places to look are NADA and Kelley Blue Book. Two good places to look are. When you file a Chapter 7 bankruptcy at a time when you owe a balance on an automobile loan, you are required to state your intention as to whether you intend to retain the vehicle “securing” the loan or whether you intend to surrender it. You are off the hook for payment of the remaining loan balance. The words "Automatic Order Discharging Debtor Chapter 7" almost don't feel real. Your attorney may recommend a redemption funding company. At a minimum, the lender can expect to get back the value of the vehicle, either through sale of the collateral or payment by the borrower. Retaining a Vehicle in Chapter 7 Bankruptcy: Reaffirmation and Redemption. While the debt might be discharged in the bankruptcy case, the security agreement that covers the collateral is not discharged. Two good places to look are NADA and Kelley Blue Book. In a redemption, you pay the creditor that has the lien on the car the current market value of the car in exchange for the title to the car. For example, if you owe $15,000 to Ford Motor Credit, but the car securing the debt is only worth […] One of the options available to debtors in a Chapter 7 bankruptcy for keeping their car is to redeem the car. First, you will need a written appraisal of the vehicle’s value utilizing a method of valuation in compliance with current Bankruptcy Court rulings on the subject. What is the Redemption Option in Chapter 7 Bankruptcy. Redeem a Car Loan in Chapter 7 Bankruptcy. In a Chapter 7 Bankruptcy, you have rights! Chapter 7 bankruptcy allows you to keep certain exemptions that are not subject to seizure or sale. Paying the fair market value is known as redeeming, whereas continuing on with the same note is otherwise known as "reaffirming." Under chapter 7 bankruptcy, the client can use 722 Redemption to buy out the car at the current market value of $10,000. Determine how much your vehicle is worth. How to Redeem a Car in Chapter 7. Since the new loan was made after you filed bankruptcy, the new loan is not discharged in the bankruptcy case. This is a handy tool found in chapter 7 that allows you to pay the value of your car instead of what is owed. You may get a default judgment approving the redemption. You have to pay the creditor in one lump sum which is difficult for most people. It is also worthwhile to contact other lenders, like your credit union or the bank where you keep your deposit accounts, especially if you owed them no money that will be discharged in the bankruptcy. That sounds a little scary to many people considering bankruptcy, but in fact most people who file for Chapter 7 don’t lose any property. You can’t use the redemption process to redeem property that secures business debts, such as a car that you use for business purposes. In plain English that means chapter 7 debtors have the option of paying the fair market value (i.e. Tips for Choosing Do-It-Yourself Bankruptcy Software. The debtor may redeem the car by paying the creditor $5,000 with the remaining $4,000 balance discharged as a general, unsecured debt in the bankruptcy case. ... For example, if you owe $8,000 on your car loan, but the vehicle is only worth $4,000, if you pay $4,000 to redeem the car, you won't be responsible for the rest of the loan balance. If you’re still making payments on a car loan, you haven’t paid for your car yet and he only way to keep the car is to pay for it. Reaffirmation is far more common. You need it because the next step in the process is that your bankruptcy attorney will draft and file a separate Motion to Redeem your vehicle after your Chapter 7 case is filed. You can also find several online by searching for “redemption funding” or redemption financing”. Two good places to look are NADA and Kelley Blue Book. However, there is a catch. When you redeem the car in the bankruptcy, you pay the lender either the outstanding balance or the value of the car, whichever is less. You won’t be able to redeem your residential home or vacation house. It is process by which you sign, with your lender, and, when appropriate, your bankruptcy attorney, which re-obligates you to the vehicle … Redemption is an under-utilized process in Chapter 7 because they require a little more work from the debtor filing the bankruptcy—and a little more expense in terms of attorney’s fees and court filing-fees. Here's help. However, there is a catch. In this age of 72-month, sub-prime used vehicle loans at 20+% annual interest, it is an option worth keeping in mind. In a bankruptcy case, the lender still has the right to expect payment of the value of the vehicle. Where your bankruptcy attorney does agree that redemption is a cost-effective option for you, the process of redemption is as follows. Home » chapter 7. chapter 7. I have had my meeting of creditors already and there were no questions other than the routine yes/no. The challenge is always coming up with the lump sum redemption amount, but this is something your attorney can discuss with you in a private consultation. What Are Nonexempt Assets in a Bankruptcy Case? As with any motion, you need an exhibit or some documentary evidence supporting your claim. In certain types of bankruptcy – specifically, Chapter 7 bankruptcy – large amounts of debt can be discharged when a case is dismissed. 3. This video explains the redemption process. Once the Motion is filed, however, if the creditor holding the lien files no response at all, it will be because they recognize that your value is well-founded and fair. First, there’s the promissory note. At some point, during or after the bankruptcy (depending on whether your auto loan lender takes the trouble to file a motion to lift the “automatic stay” injunction that prevents creditors from engaging in collections activity during your Chapter 7 bankruptcy), the creditor with the lien on your vehicle title will take possession of the vehicle. Generally, this requires Kelley Blue Book retail value, as assessed by an appraiser experienced in such valuations. Redemption allows you to “buy” the vehicle free and clear out of the Bankruptcy Estate you created when you filed your bankruptcy for what it is currently worth in fair-market value terms. But what if you want to retain the vehicle? Removing Bankruptcy's Automatic Stay: Past Due Car and House Payments. 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