What to Know About a Motion to Redeem a Vehicle in Chapter 7 Bankruptcy

One of the most frightening prospects of bankruptcy for many people isn’t what stands to be gained – as in the freedom from debt and the potential for a fresh start – but what they might lose. In fact, one of the biggest reasons people hesitate to file for bankruptcy despite it being the best and most logical option for their financial situation is because they worry that they might lose significant assets like their home or their vehicle.

If this is concern that you’re struggling with, we have some good news for you. There are options other than turning over your family home and your beloved set of wheels when you’re working your way through bankruptcy. Here, we’ll discuss a few of those – including the motion to redeem a vehicle in Chapter 7 bankruptcy and how it impacts your overall case.

Why Do Bankruptcies Sometimes Require the Remittance of Assets?

In certain types of bankruptcy – specifically, Chapter 7 bankruptcy – large amounts of debt can be discharged when a case is dismissed. This can be a huge relief for those struggling to catch up financially and who don’t have a plan for how to eventually pay off these debts. However, this type of major relief doesn’t come without a cost.

To offset the cost of discharged debts, your creditors may seize some of your assets. This may include property, such as homes, vacation properties, lots, etc. It may also include assets such as vehicles. Either of these seizures can be upsetting for those that they happen to, but they’re both perfectly legal – and perfectly preventable, with the right preparation and legal counsel to guide you through the bankruptcy process!

What is a Motion to Redeem Vehicle?

If surrendering your vehicle to your creditor to offset the cost of your outstanding debt doesn’t sound like your idea of a good plan, you do have several other options.

The first is to reaffirm the debt on your vehicle, which means to keep the debt to the particular creditor responsible for your auto loan out of your bankruptcy. While this may sound counterproductive – after all, you want your debts discharged, don’t you? – maintaining this one debt can keep you from losing your vehicle!

However, so can a motion to redeem a vehicle during a bankruptcy. For many vehicle owners experiencing bankruptcy, this is the better option if at all possible. This approach involves paying down the remainder of the outstanding debt on your vehicle or paying the current market value for your vehicle at present – whichever is lower – to your creditor instead of remitting your vehicle or reaffirming your debt. This option can be very appealing to those who have little left to pay toward their vehicle loan since this will be the amount they owe in this case.

So, what’s the catch? This is done in one large, lump sum payment unless otherwise agreed upon, and agreement rarely offered or reached during bankruptcy proceedings. Be aware of this before choosing this option.

The financial strain that this option can put on a person is one of the major factors to consider when selecting a motion to redeem a vehicle instead of reaffirmation or any other option. This is because people who are already experiencing bankruptcy often do not have ready access to large sums of money to pay these totals in full. However, finding a solution to this issue can mean finding a solution to keeping your vehicle instead of losing it in your bankruptcy, a perk that many people would do a lot to achieve.

Help Paying for Your Redemption

Thankfully for those who fear that they might struggle to afford the upfront cost of a motion to redeem a vehicle, there are options available to assist you. Since this is a common problem, more and more legal aid programs and financial assistance programs have developed in the last decade or so with the specific goal to help those who are coping with bankruptcy and the fear of losing their vehicles – as well as the inability to finance a motion to redeem a vehicle outright.

Be sure to ask about financing options in your area before moving forward with one of these motions. You never know how easy it might be to find assistance right in your own backyard for what you need – and your legal counsel should be able to direct you toward programs that can benefit your exact situation. Just be aware that redemption financing companies often charge high interest rates, so be sure to ask your legal professional if they think the new loan would be worth your time and money before committing.

Steps to Success

How exactly do you file a motion to redeem a vehicle in a chapter 7 bankruptcy? Here is a quick rundown of the steps you should take to succeed:

1. First, determine your vehicle’s current market value.
2. Weight this against the amount you currently owe, if anything.
3. Find out how feasible it is for you to redeem your vehicle by talking to a bankruptcy attorney.
4. Seek information about redemption funding if necessary. Apply for funding should you need it.
5. Talk to your attorney about negotiating the terms of your loan with your creditor and evaluating the value of your vehicle so that you can get the lowest possible estimate.
6. After negotiations are finished, have your attorney compile and complete the motion to redeem vehicle for you.
7. If the court approves the motion, you are free to let your new lender take care of the old debt or to pay down the debt yourself.

When you’re ready to learn more about navigating the process of bankruptcy and the finer details of keeping a vehicle despite it all, contact the Florida legal experts at Van Horn Law Group. They can help you make sense of everything – and get the best possible results!