Here in southern California, everyone needs their cars to get around. It’s no different when filing bankruptcy. A frequently asked question is, “How can I keep my car when I file for bankruptcy?” The short answer is you can absolutely keep your car and file for bankruptcy. However, the more important question would be do you simply reaffirm the debt, or would redemption be more beneficial? In a prior post I talked about reaffirmation of an auto loan. In this article, I’ll be discussing in detail what redemption is and when it might be right for you.
The term Redemption is found in the Bankruptcy Code under Section §722. A redemption loan allows a borrower in Chapter 7 bankruptcy to “cram down” a loan to the retail value of the vehicle and force a lender to accept a reduced payoff. The reduction in principle can save the borrower hundreds or even thousands of dollars over the life of the loan! Source: Quality Finance
Do You Think You Could Benefit From a Redemption Loan? Here are some questions to ask your bankruptcy lawyer.
Redemption allows you to keep your car for the current fair market value and get a new loan that can lower your monthly payment and lower the total amount owed. Keep your car and lose those overwhelming car payments.