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Redeeming Property in Chapter 7

Bankruptcy is intended to provide individuals with a fresh start. 11 USC 722 of the Bankruptcy Code provides one potentially valuable tool that Jeff Field & Associates can help you utilize to obtain your fresh start.

Under 11 USC 722 of the Bankruptcy Code, which is available only in chapter 7 bankruptcy, you may redeem tangible, personal property by paying to the current secured lien holder the “replacement value” of the property. Replacement value is the price a retail merchant would charge for property of that kind, considering the age and condition of the property. As an example of how 722 redemption works, you finance a vehicle worth $10,000 but you owe $20,000 on the loan. 722 redemption allows you to purchase the car from the current creditor for $10,000, saving yourself from paying back $10,000 on an underwater asset. Unfortunately, you may only redeem the property by paying a “lump sum” to the current lienholder rather than through installments. Most people in bankruptcy, will not have the means to personally fund a redemption, but fortunately, even if you cannot come up with the money either personally or from friends or family, there are several companies that specialize in providing redemption loans specifically for this purpose. Although these redemption loans typically have very high interest, in many situations you can end up with a significantly lower car payment and paying much less for the vehicle than you would have otherwise.

While redemption is most commonly used for vehicles, it may also be utilized for other personal property, such as jewelry, furniture and electronics. Redemption also does not require that you be current on the loan, which allows you to obtain chapter 7 debt relief and keep property for which you are delinquent.

In many cases, redemption is not feasible or practical, but in some cases it can be very beneficial saving thousands of dollars and truly providing that fresh start bankruptcy law intended. Our attorneys can work with you to determine whether a strategy involving redemption is in your financial best interests.

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