With the cost of automobiles skyrocketing, many, if not most, Americans are borrowers on a car loan. Not surprisingly, when someone is facing bankruptcy they often worry most about losing their vehicle – a car or truck they need more than ever to get back and forth to an existing job or secure new employment.
Fortunately, there are options for bankruptcy filers to keep their car by reducing the amount of money owed on a car loan called the 722 redemption process. A 722 redemption enables a borrower to decrease the balance of a car loan to the current market value of the vehicle. For example, If a bankruptcy filer has a 20k car loan and the market value is really just 8k, the 722 redemption process allows borrowers to pay off and fully own their car by paying the car company the lower lump sum.
Of course, coming up with the lump sum poses a whole new obstacle for bankruptcy filers short on cash, but there are a number of resources to obtain financing for 722 redemption lump sums, including banks and credit unions, albeit at a higher interest rate, or borrowers can seek a personal loan through a family member or friend.
Once a borrower secures the financing to pay the lump sum, they can apply for a 722 redemption. If your lender agrees with the basis of the valuation of the vehicle, the court will likely grant the motion allowing a borrower to pay the creditor the lump sum in exchange for a release on the lien held on the car.
If you have questions regarding how property including your car is treated in a Chapter 7 bankruptcy, contact an experienced bankruptcy attorney today. Having the information you need is a crucial first step to solving a difficult financial situation – contact bankruptcy attorney Charles E. Covey to decide what bankruptcy strategies work best for your unique financial situation. .