What Is a 722 Redemption?

One of the worries that people have when they are filing for a Chapter 13 or Chapter 7 bankruptcy is losing their car. In fact, fear of losing their car is one of the biggest things that holds people back from filing for bankruptcy. A car is a necessity – it takes the kids to school, takes adults to work, drives elderly parents to and from doctors’ appointments. With Broward County playing a hasty catch-up on public transportation, a car is just as much a necessity of life for some of us as it is in car crazy Los Angeles California. However, I am going to let a cat out of the bag.

There is a very good chance that you can file for bankruptcy and still keep your personal vehicle. In fact, section 11 USC 722 of the federal bankruptcy code allows debtors to redeem collateral (such as a car, motorcycle, or even a boat) from bankruptcy by paying the retail value in a lump sum to the creditor. People usually do this to redeem their personal vehicles when they are worth less than alone taken out for the original purchase. Once the lump sum is conveyed, the debt is fully discharged and you have your car.

“But Mr. Van Horn? I’m filing for bankruptcy. Where am I going to get the money to do that?”

You’d be getting the money from a business that specializes in 722 redemption loans.

Does that sound counterintuitive? I agree that it can sound like exactly the wrong thing to do when you’re going into bankruptcy. Yes, the interest rate can be high, but when you are dealing with a reputable company this can get you out from under the car loan without throwing you under the bus. When the loan is worth much more than the retail value of the car, it is in your best interest to get out from under the excess of the loan and the interest charges that are accruing. In general, you want to try to keep the length of the loan about the same as your original car loan was. Extending the loan for too long keep you paying interest charges for longer and negate the financial benefit.

If fear of losing your vehicle has been holding you back from filing from bankruptcy, come in and talk to us about it. Your initial consultation is free at either our Fort Lauderdale or West Palm Beach office. We are open seven days a week to give you a full range of options when it comes to scheduling your appointment. We know and understand the difficulties that debt can bring, we want to help you get on with the rest of your life. Call us today and find out why we are one of the top rated bankruptcy firms on Yelp. We do our best for all of our clients and treat you with respect and dignity. Call us today and let’s get started.