What is Redemption in Ch 7?

Posted by Kevin Ryan | Jul 01, 2016 | 0 Comments

When an individual person files a Chapter 7 bankruptcy case, they may have an opportunity to pay an auto lender, or a lender who took household goods as collateral, less than what is owed under the loan agreement.

Redemption is allowed under Title 11 U.S. Code, Section 722, which states:

“An individual debtor may, whether or not the debtor has waived the right to redeem under this section, redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted undersection 522 of this title or has been abandoned under section 554 of this title, by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption.”11 U.S. Code, Section 722

In order to “redeem” your loan, you must file an application, or “motion” with the U.S. Bankruptcy Court where your case is pending.  The motion must be filed prior to the case being closed by the Court, before the Discharge Order is entered.    Redemption is feasible if the fair market value of the property securing the loan is worth significantly less than what is owed under the loan agreement.  An example would be  a situation where the Debtor is locked into a high interest secured auto loan for $20,000.00, where the vehicle that secures the loan is only worth $10,000.00 at the time of filing of the bankruptcy. This is a common occurrence in bankruptcy matters, because people usually delay filing a bankruptcy for months, and sometimes years while their credit score stays in the 400-500 point range.   Older car loans are sometimes rolled into a new high interest car loan by the debtor long before filing a bankruptcy case, because that is all the debtor can afford, while requiring transportation for work or family obligations.

Redemption is most commonly applied in the above-described auto loan scenario. There are specialized lenders such as http://www.722redemption.com who can provide funds for a new “redemption” loan for the lower principal amount, as determined by the Bankruptcy Court.  See: 722 website at:  Redemption Loan Funding

If you have questions about redeeming a loan inside of a bankruptcy case, Call me. I'll BE there for you. -Kevin Ryan, Bankruptcy Attorney

About the Author

Kevin Ryan

"I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. And I'll make them go away."  -Kevin Ryan, Attorney at Law Kevin Ryan is a graduate of the College of Wooster and the Cleveland Marshall College of Law. He is admitted to practice before all Alabama State Courts, the United States District Court for the Southern District of Alabama, and the United States Bankruptcy Court for the Southern District of Alabama. The United States Bankruptcy Court is a part of the United States District Court. Since 1998, Mr. Ryan has represented thousands of individual clients in bankruptcy, criminal, divorce, probate, personal injury, and real estate matters.  Attorney Ryan is also a licensed real estate agent in Alabama.  He handles  Bank-owned properties, short sales, and conventional sales in addition to conventional real estate listings.   This wide range of experience enables Attorney Ryan to take a wider look at your legal matter. It is important to consult with an attorney who can see from experience how other legal issues may affect your situation, and advise you accordingly. Personal Info Kevin Ryan is a member of First Baptist Church in Silverhill, Alabama. He resides in Silverhill with his wife Jessica and their three children. Committed to helping our Clients achieve a fresh financial start Our practice focuses primarily on consumer bankruptcy matters under Chapter 7 and Chapter 13 of the United States Bankruptcy Code.  Our law practice also includes matters where bankruptcy litigation, appellate work, or involvement in civil lawsuits is needed by a client.     No representation is made that the quality of any of these legal services is of higher quality than another attorney or law firm.   The United States Bankruptcy Code requires the following notice:  We are a Debt Relief Agency, which means we help people get legal relief from their Debts through the bankruptcy process. Interested in learning more about our bankruptcy attorney near Mobile, Alabama? Contact Us for help with chapter 7 bankruptcy or chapter 13 bankruptcy in Mobile, Baldwin and Washington counties. Education Juris Doctor, Cleveland Marshall College of Law, 1997 Employed full time as a paralegal while attending law school in the evenings. B.A., The College of Wooster, 1994 NCAA Div.III All Conference (N.C.A.C.) Football Team : Defense 1993; Most Inspirational Senior Award 1993; Co-captain 1993; Letterman 1991-1993; Phi Sigma Alapha Fraternity 1991-1994; Athletic Director Jurisdictions Admitted to Practice Alabama


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I'll BE there for you.

I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. - Kevin Ryan, Attorney at Law