Contact The Law Offices of Walter Metzen & Associates now to schedule a no-cost, no-obligation initial consultation. I need to replace this car for my wife. Replace your car today, with late model, low mileage vehicle! You are off the hook for payment of the remaining loan balance. Two good places to look are NADA and Kelley Blue Book. However, they are very effective, so long as they are handled properly. How Soon Can I Qualify for a Mortgage After Bankruptcy? If … Can I still redeem a car after discharge of Chapter 7? Under chapter 7 bankruptcy, the client can use 722 Redemption to buy out the car at the current market value of $10,000. When you surrender your car in chapter 7 bankruptcy you are not liable for any deficiency you owe the lender. If the creditor does file a response, it is often simply an invitation to negotiate a settled-upon redemption amount, somewhere between the values asserted by the two parties. 722 Redemption. 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. Debtor owns a car that is worth $10,000 but owes the bank $20,000. Of course, your attorney will explain your court’s process in more detail. Talk with your bankruptcy attorney about whether it is feasible for you to redeem your vehicle. It is something you are allowed to do in Chapter 7 bankruptcy. It is a process to consider carefully—and it is a process which attracts more attention than the further option: redemption. Many people who file a chapter 7 bankruptcy owe much more than the value of their vehicle and continuing to make these monthly payments after a bankruptcy hinders their ability to make a fresh start. 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. In Chapter 7, you can buy or "redeem" your secured personal property at a discount by paying its current value, not the amount you owe. For instance, if you owe $15,000 on a car that’s only worth $5,000 at auction and surrender that car in chapter 7 bankruptcy, you will not be liable for the remaining $10,000. 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. Determine how much your vehicle is worth. 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. Therefore, if you want to keep that car, you will have to continue making payments or at least pay the creditor the value of the car. ... 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. Redemption is not a rare occurrence, but it is usually not included in the standard fee that a bankruptcy attorney charges. In order to keep your vehicle after a chapter 7 bankruptcy, you must continue to make your normal car payment. 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. People are often concerned that if they file bankruptcy they might have to surrender some of their personal assets to the court to be liquidated to pay creditors. by Walter Metzen | Oct 29, 2019 | Detroit Bankruptcy Blog, There are various options available when you have a vehicle loan in bankruptcy. If you are surrendering a car or other vehicle in Chapter 7 bankruptcy, that is a simple enough matter: your Michigan bankruptcy attorney checks the box for “surrender” on a section of your bankruptcy petition called the “Statement of Intention.”. Even if you did nothing about the car during the bankruptcy and your liability under the promissory note was discharged along with your other debts, the lender would still have the right to repossess the car and sell it after the case is over. Where your bankruptcy attorney does agree that redemption is a cost-effective option for you, the process of redemption is as follows. Personal property is all property other than real estate. In chapter 7 bankruptcy, a client can divide a secured … In order to entice the lender to put up the money, the borrower agrees to give the lender a security interest in collateral – often the property that the borrower is purchasing with the money from the lender. You have to pay the creditor in one lump sum which is difficult for most people. If you want to keep your car, you have to take some action to keep the lender from getting your car. For example, if you owe $15,000 to Ford Motor Credit, but the car securing the debt is only worth […] In this age of 72-month, sub-prime used vehicle loans at 20+% annual interest, it is an option worth keeping in mind. Documentation needed if you are filing Bankruptcy in Michigan, discharge you receive at the end of your Chapter 7 bankruptcy. The debtor is permitted a $1,500 exemption in a car, proposed 11 U.S.C. Your third option in a chapter 7 bankruptcy is to redeem your car. If you wish to redeem your vehicle in a Chapter 7 bankruptcy then you need to apply for a 722 redemption loan. If you fail to make the payments as agreed, the redemption lender will have all the rights available under its security agreement and under state law to either repossess or force payment. Redeem a Car Loan in Chap­ter 7 Bank­ruptcy December 4, 2019 by Albin Renauer If you have a car loan at the time you file for Chap­ter 7 bank­ruptcy, you have three options for deal­ing with it. While the debt might be discharged in the bankruptcy case, the security agreement that covers the collateral is not discharged. The downside to redeeming is the creditor will require you to pay cash to buy it. Every car loan involves two agreements. 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. What Happens When I File Bankruptcy After I Have Been Sued? If you have a secured loan, such as a financed car, and you file a chapter 7 bankruptcy case, you have a few options available. Compare the value of your car with the amount your lender says you owe. Two of the biggest players in the market are. How to Redeem a Car in Chapter 7 Determine how much your vehicle is worth. Once your have received a 722 redemption loan and are in a Chapter 7 bankruptcy, a motion will be filed to redeem the vehicle. But, there’s a big downside to redemption. even though your Chapter 7 discharge will otherwise free you from the liability. Once the court approves the redemption, the new lender will pay the old lender (and will pay your attorney any agreed-upon fee for handling the redemption). 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. Redemption is an option available only in Chapter 7 bankruptcy. The old lender will release the old lien, and you will now be liable to the new lender on your new loan. The difference between those two figures is often significant. 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 won’t be able to redeem your residential home or vacation house. 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. 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. Compare the value of your car with the amount your lender says you owe. Tips for Choosing Do-It-Yourself Bankruptcy Software. Thus, for example, if a debtor owned a $2,000 car, subject to a $1,200 lien, the debtor could exempt his $800 interest in the car. Here, we’ll discuss a few of those – including the motion to redeem a vehicle in Chapter 7 bankruptcy and how it impacts your overall case. This field is for validation purposes and should be left unchanged. Chapter 7 bankruptcy allows you to keep certain exemptions that are not subject to seizure or sale. Your attorney may recommend a redemption funding company. 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. What is the Redemption Option in Chapter 7 Bankruptcy. Apply Today! Meaning, if you have a loan balance of $20,000 but your car’s Kelley Blue Book value is only $14,000 then you can pay the lien holder the fair market value of $14,000 and keep your car. Redeem the car by paying only how much it’s actually worth There is, however, an alternative. The attorney will probably ask for an additional fee because of the time and paperwork involved in making it happen. When you file Chapter 7, you have at least three choices in how you deal with your car loan: In this article, we will talk about redeeming the vehicle for its value. In a Chapter 7 Bankruptcy, you have rights! Removing Bankruptcy's Automatic Stay: Past Due Car and House Payments. One benefit of a chapter 7 bankruptcy is the option to redeem a vehicle. Once you apply for financing, your attorney may have to do some negotiating with the original lender on the value and the condition of your vehicle. 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. Learn more about how redemption works in Chapter 7 bankruptcy. First, there’s the promissory note. If you do so, as noted above, the creditor will be required to release their lien—and you will drive that car out of your bankruptcy free and clear. How to Redeem a Car in Chapter 7. Upon receiving the official appraisal, you can contact the creditor directly and let them know that you want to redeem the car and the amount stated on the appraisal. I own one vehicle outright and have another financed, which I am surrendering. If I Filed Bankruptcy Before, How Long Before I Can File Again? One of the options available to debtors in a Chapter 7 bankruptcy for keeping their car is to redeem the car. This option can save you quite a bit if you owe substantially more than what the property is worth, and the property meets these requirements: serves as collateral for a secured debt 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. We have discussed the reaffirmation of vehicle loans previously here. Today was the deadline on my Ch.7, and since I was working the night shift, I decided to check Pacer when I got home. You can redeem property in Chapter 7 bankruptcy only if you meet all of the following conditions: 1. Almost always you recommit to paying the entire loan balance, … In certain types of bankruptcy – specifically, Chapter 7 bankruptcy – large amounts of debt can be discharged when a case is dismissed. Because this requires a lump-sum payment, however, it's often not feasible for people considering bankruptcy. Too Broke to File Bankruptcy? 3. Two good places to look are NADA and Kelley Blue Book. Any balance you owe on the loan which the vehicle secures as collateral above and beyond that fair-market value amount is then discharged in full with the rest of your dischargeable debt at the end of your Chapter 7 process. If the value is significantly lower, it might be worth your while to pay off the value or to apply for redemption financing. I have had my meeting of creditors already and there were no questions other than the routine yes/no. Valuing the Car If you have a car loan at the time you file for Chap­ter 7 bank­ruptcy, can “reaf­firm” the debt, return the vehi­cle to the lender, or redeem your car loan. 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. Two good places to look are. These redemption funding companies charge a relatively high interest rate, but the new loan may be worth it if redemption of the original debt saves you money over what you would pay the original lender. As with any motion, you need an exhibit or some documentary evidence supporting your claim. 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. The right to redeem extends to the whole of the property, not just the debtor’s exempt interest in it. In plain English that means chapter 7 debtors have the option of paying the fair market value (i.e. No creditors were present or represented. It is one of the benefits of the process. This can sound really good if you don’t owe much on the vehicle or if you more than the car is worth, which is true of many loans. For more information about reaffirming the debt, instead see the article What is a Reaffirmation Agreement? 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