REDEMPTION IN A CHAPTER 7 BANKRUPTCY
LEGAL NEWS YOU CAN USE FROM THE DESK OF MICHAEL S. BAILEY, ATTORNEY-AT-LAW. If you have questions, call me at (513) 631-0022.
A “redemption” allows a debtor in a Chapter 7 bankruptcy to retain personal property (autos, household goods, jewelry, etc.) that is collateral for a secured debt. It’s possible for a debtor in a “redemption” to pay a secured creditor significantly less than the amount of the debt owed the secured creditor. However, the debtor must pay the fair market value of the collateral to the secured creditor.
By way of an example, if a debtor owes a secured creditor $10,000 for an auto and the fair market value of the auto is $4,000, the bankruptcy code permits the debtor in a “redemption” to pay the secured creditor $4,000 while eliminating the remaining balance of $6,000 owed for the secured debt ($10,000 - $4,000). Note that the amount due the secured creditor in a “redemption” must be paid in a lump sum. There are lenders who specifically make loans to debtors to “redeem” an auto or other personal property for a “redemption”.
A “redemption” can realize significant savings for the debtor and allows the debtor to retain the secured collateral while eliminating some debt. Want to know more? Give me a call.
This insight into the law is provided by Michael S. Bailey, Esq. of the law firm of Bailey & Gunderson Co., L.P.A., with offices in Norwood and Western Hills. Phone: (513) 631-0022.
