What is Bankruptcy Redemption?
Most debtors share the fear that drives some of them away from filing for bankruptcy. They fear that they’ll have to give up everything they own, or at least let go of a significant portion of their property. This is one of the most common misconceptions about bankruptcy. Contact the expert Carlsbad bankruptcy attorneys to get legal support for your bankruptcy case. Do you have any questions about bankruptcy redemption, failing to make Chapter 13 bankruptcy monthly payments, or about Chapter 13 bankruptcy plan in general? Maybe you have already filed for Chapter 7 Bankruptcy but you’re still dealing with creditors’ harrasment. Whatever questions or issues you may have, don’t hesitate to reach out to us today.
What does the term bankruptcy redemption stand for?
When filing Chapter 7 bankruptcy, debtors who wish to keep certain personal assets may opt either for debt reaffirmation or bankruptcy redemption. The debt reaffirmation process requires signing of a Debt Reaffirmation Agreement between a creditor and a debtor, stating the latter is obligated to keep paying for the asset they wish to keep. The payments are to be made in the form of monthly installments, until the debt is paid in full. If the debtor is unable to make the payments, the asset in question will be repossessed.
Chapter 7, however, offers a second option as well. The process of bankruptcy redemption allows the debtor to pay for the asset they wish to keep in one lump sum, rather than making monthly payments that can take up to several years.
The value of an asset in a bankruptcy redemption case
There is another important difference between debt reaffirmation and bankruptcy redemption. The reaffirmation process requires the payment of the debt in full, unless a debtor and a creditor reached an agreement that lies on more favorable terms.
In the case of bankruptcy redemption, the amount of debt becomes either the outstanding balance, or the current value of the asset. For example, a debtor owes $20,000 for a car they’ve had for a while. In a redemption case, the estimation of the current car value is made, and the debtor has to pay this value (for example, $10,000), as mentioned, in one lump sum.
Acquiring funds to make a debt redemption payment
As the difference between the original amount of debt and the current asset value can differ significantly, many debtors choose to get into the process of debt redemption, rather than debt reaffirmation. A debtor who does not hold the required amount of funds to pay for the asset in one take, may opt for lending the amount in question from a friend or a family member.
Another source of the necessary funds may be a redemption funding company. However, as this would mean adding another debt to the list, it is strictly advised to consult a reliable bankruptcy lawyer before taking such a step.
Before deciding on bankruptcy redemption, consult with a dependable bankruptcy attorney
Only a licensed, experienced bankruptcy lawyer can adequately estimate the state of your financial affairs, and advise which steps to take to bring everything in order, timely and risk-free. No bankruptcy case should be rushed, and only the experienced legal counsel can help a debtor get their life back on track. Schedule a free consultation with the office of Chang & Diamond, APC, and get the professional help necessary to keep you safe in the process of your bankruptcy case.