How does the 722 redemption process work?

One of the biggest worries that people have when they are filing for any kind of bankruptcy is the possibility of losing their vehicle. The fear of losing a car often holds people back from filing for bankruptcy, and it’s easy to understand why. 

For most debtors, keeping a reliable car is crucial after bankruptcy, whether you need it to take your kids to school, to drive to work or to drive your parents or loved ones to and from doctors’ appointments. And let’s be real, Broward County does not have the best public transportation. Luckily, there are a number of options out there for keeping your car during and after your bankruptcy case has been filed.

The 722 redemption process is an excellent option that enables you to decrease the amount of money that you owe on your car. During a Chapter 7 bankruptcy, you can undergo a 722 redemption process, which enables you to decrease the balance of your car loan to the current market value of the car or vehicle. This is a great opportunity, since most cars have depreciated well below what is owed on the vehicle loan.

During the 722 redemption process, you seek out a court order that enables you to pay your loan company one big payment that is around the current value on the market for your car, meaning that if your car loan is $30,000 and the market value of the car is only $18,000, then the 722 redemption process enables you to pay off and fully own your car by giving the loan company a lump sum of $18,000. One problem with this is that most people going through bankruptcy do not have enough money to pay off their car. Another option is to find a company that works on 722 redemptions, who can finance the lump sum payment for you.

Financing or getting a 722 redemption loan

722 redemption loans are available through a number of different sources, including banks and credit unions. You can also get a personal loan through family, friends or relatives. Keep in mind that most 722 redemption loans have very high interest rates, so it is crucial to review the terms of the 722 redemption loan to figure out whether the decreased loan balance is still a good option if the interest rate is increased. It’s probably still a good idea is the reduced loan balance is low enough to reduce your monthly payments and the payment period.

You need to apply for a 722 redemption loan or get a loan from family or friends before a motion is submitted to the court. The loan company will simply review your situation to figure out if they are willing to provide you with a 722 redemption loan. If you are approved for the loan, then a 722 redemption motion will be filed in court.

How does the 722 redemption process work?

The bankruptcy code enables you to pay one huge payment to get your personal property, usually vehicles, back from a secured lien holder. You need to pay the retail value of the personal item in one lump sum, rather than over a long period of time. While the 722 redemption process is usually used for cars, the process can also be used for electronics, jewelry and furniture. Unfortunately, you cannot use redemption to reduce the value of your home. The process only applies to personal property, not real estate.

Under 11 USC 722 of the Bankruptcy Code, you can get tangible personal property, like your car or laptop, back by paying a lump sum to a secured creditor. The secured creditor then needs to release the lien held on the secured personal property. In order for the 722 redemption process to apply, the property needs to be tangible personal property used mainly for household, personal or family use, including cars, household furniture, household appliances, jewelry and tools. The property must be paid off in a lump sum payment, based on the current retail value. For cars, this retail value is offered by NADA, Kelley Blue Book or Edmunds.

You need to apply for a 722 redemption loan if you want to get your car back during a Chapter 7 bankruptcy. The interest is usually higher, since the risk for the lender is higher. Once you have received the loan and are in a Chapter 7 bankruptcy, a motion is filed in court to redeem the vehicle. If the court grants the motion, then the secured creditor is paid a lump sum amount based on the current retail value of the car. The secured creditor then needs to release the lien held on the car.

Keep in mind that your loan company might not agree with the basis of your valuation and might choose to object to the motion by filing an answer that outlines the basis for their objection. It is crucial that you submit evidence supporting the basis for figuring out the value of your car. It might be helpful for you to include a copy of the valuation that outlines all of the features of your vehicle and mileage.

If you need to file a Chapter 7 bankruptcy and are considering using the 722 redemption process to retain your vehicle or other personal property, the Van Horn Law Group can help. Contact us or visit our website to learn more here.