• Skip to content
  • Skip to footer
  • Areas of Practice
    • Estate Planning
      • Complete Guide
      • Digital Assets Management
      • Revocable Living Trusts
      • Trusts vs Wills
      • Trust General
      • Wills
      • Probate
    • Business
      • A Guide to Business Formation
      • Corporation
      • Limited Liability Companies
      • Real Estate
    • Civil Disputes
      • Alternative Dispute Resolution
      • Arbitration
      • Mediation
      • Eviction
      • Insurance
      • Personal Injury
      • Wrongful Death
    • Debtor/Creditor
      • Oregon Bankruptcy Dashboard
      • Filing Bankruptcy in Oregon Chapter 7 | Chapter 13
      • Collection
      • Foreclosure
  • Attorneys
  • Staff
  • Reviews
  • Contact
  • Pay Now

McCord & Hemphill | Bend Attorneys | Bankruptcy | Estate Law

What is “Redemption” in Chapter 7 Bankruptcy?

January 23, 2012 by Brian Hemphill

Brian Hemphill
Last updated: October 23rd, 2020

Redemption is a tool available only in a Chapter 7 Bankruptcy.  It allows you to pay off a loan by paying an amount equal to the value of the loan collateral.  However, redemption may not be an option for all Chapter 7 debtors because it requires you to pay off the loan in a lump sum.

Many people who file bankruptcy have assets that are collateral for a loan, such as a car with an auto loan or furniture, electronics, or appliances that were purchased on credit.  Often, those items have depreciated significantly and the value of the property is much lower than the loan amount.  For example, your car loan balance is $15,000, but the value of your car has sunk to $10,000.  Or, you purchased a computer and owe a balance of $1,500, but the computer is now only worth $500.

Redemption is only available for personal property used primarily for household purposes, such as personal vehicles, furniture, household appliances and household electronics.

With redemption, you pay the lender a lump sum equal to the current, depreciated value of the asset.  To redeem property in bankruptcy, you file extra paperwork with the Bankruptcy Court called a “Motion to Redeem”.  If the Motion is granted, the Bankruptcy Court will issue an Order requiring the lender to release its lien on the collateral in exchange for the redemption payment.

You must be prepared to pay the redemption price in a lump sum.  That can be a problem if the redemption price is several thousand dollars.  Fortunately, some lenders provide financing to people in bankruptcy seeking to redeem collateral.  These lenders charge high interest rates, but you often save money overall because the principal amount you are paying back is lower.  You would basically use bankruptcy to refinance your loan, probably with a higher interest rate, but with a lower principal amount.

READ  What is the "Bankruptcy Code"?

If you would like more information about redemption in Chapter 7 bankruptcy, please feel free to contact Brian T. Hemphill.

Related Posts

  • What is Chapter 12 Bankruptcy?

  • Bankruptcy Filing Fees 2020

  • What is the "Bankruptcy Code"?

Filed Under: Bankruptcy Tagged With: bankruptcy, bankruptcy basics, chapter 7, redemption, refinancing

Footer

Get in Touch


    Make Payment
     

    This website presents general information about McCord & Hemphill LLC and is not intended as legal advice nor should you consider it as such. You should not act upon this information without seeking professional counsel. Please keep in mind that merely contacting McCord & Hemphill LLC will not establish an attorney-client relationship. McCord & Hemphill LLC cannot represent you until the firm knows there would not be a conflict of interest, and the firm determines that it is otherwise able to accept the engagement. Accordingly, please do not send McCord & Hemphill LLC any information or documents until a formal attorney-client relationship has been established through a consultation with an attorney and you get authorization in the form of a fee agreement or engagement letter from McCord & Hemphill LLC. Any information or documents sent prior to your receipt of a fee agreement or engagement letter cannot be treated as confidences, secrets or protected information of any nature.

    © 2023 · McCord & Hemphill, LLC · Assembled by Webformix