A Quick Guide to Asset Redemption in Chapter 7 Bankruptcy
Did you know that you do not have to liquify all of your assets when you file for Chapter 7 bankruptcy in Florida? You can file for asset redemption if you have “secured debts”. Secured debt is debt that has collateral that can be used to pay off the debt. For example, if you own a car, but still owe a lender money for the car, you can file for redemption on the car during Chapter 7 bankruptcy.
So, Why Would You Want to File for Redemption on Your Secured Debts?
Simply, you can save a ton of money. When you file for redemption on a secured debt, you are asking the court to allow you to pay the lender fair market value for the collateral of the debt in one payment. Say you owe $8,000 on the car we talked about earlier, but the car’s fair market value is $6,000. You can ask the court to allow you to pay the lender one payment of $6,000 to eliminate the debt. This option saves you from having to pay a ton in interest and you no longer have a car payment to worry about.
What If You Cannot Afford to Pay the Lump Sum for Your Secured Debt?
It is reasonable to assume many people cannot afford to pay a lump sum to eliminate a secured debt. After all, we are in the middle of bankruptcy here. If you cannot afford to pay a lump sum, you can apply to participate in a redemption program. A redemption program will:
- Allow you to keep your asset.
- Pay the creditor fair market value for the asset.
- Allow you to pay back the “loan” in installments.
- Usually, allow you to make fewer payments over the life of the loan.
- Lower the amount of each monthly payment.
These programs sometimes incorporate a one-time attorney fee that is much smaller than the interest you would pay on the original loan and you can usually apply online. An experienced debt attorney can easily help you through this process. For over 15 years, Elias Dsouza has been helping people manage and retain their assets through bankruptcy in Plantation, Florida.