Legal Question in Bankruptcy in Florida

Re: what is a chapter 7 redemption

Under section 722 of the Bankruptcy Code, a debtor can compel a secured creditor (like a car loan lender) to accept a one-time lump sum payment of the fair market value of the secured collateral as payment in full on the debt.

Let's assume you have a car that NADA says is worth $2,000, but that you have a payoff on the car note is $5,000. Under section 722, you can file a Motion for Redemption with the Court. It will be called up for a hearing before your bankruptcy judge, and if your motion is in order, then the judge will enter the order. You tender the lump sum and get the title.

While the lender may oppose the motion, there are really only two primary grounds they can argue. The first is if you bought the car recently, in which case they will oppose the motion entirely. They might win that one. The second is just a dispute over the fair market value of the vehicle. NADA clean retail is the standard for the Middle District, not too much to argue there.

If you can't handle the lump-sum payment, then check out 722RedemptionFunding.com. They are a lender dedicated, unimaginatively enough, to providing loans for redemption of vehicles for debtors in bankruptcy. The interest rate is REALLY ugly, but if you are upside down enough on the vehicle, it is still a good deal. After all, you can always avoid extra interest, you can't do anything about being upside down.

Biggest thing, don't assume anything. Contact 722 Redemption Funding and they will crunch the numbers for you. If you need help with the hearing, you can hire an attorney to make a "limited appearance" for just the hearing, and 722 will pay the lawyer's fee.