Legal Question in Bankruptcy in Massachusetts
Finance Company redeeming collateral
I will be doing a Chapter 7 bankruptcy very soon. Here is the situation I am in concerning my vehicle. Its a 1998 vehicle with 120,000 miles on it and in poor shape at the moment. I still owe $3700 on it. I have heard that there is a terminology called ''redeem collateral'' that is sometimes used instead of giving up the secured item in exhange for discharge of the debt. Could you explain how this would work? Thanks in advance.
2 Answers from Attorneys
Re: Finance Company redeeming collateral
You are correct, there is the ability to redeem the vehicle in your bankruptcy. To do so, you must determine the fair market value of the vehicle, and tender payment for that sum to the creditor. Even if the fair market value is less than the amount owing, the creditor must accept payment in full satisfaction of its claim.
Having said that, like always, the devil is in the details.
Dan Gindes
781-639-5100
Re: Finance Company redeeming collateral
In order to "redeem" your car, you must pay the loan company or bank the actual cash value of the car. If you and the lender agree on the value, it is a relatively easy process; your lawyer files papers with the bankruptcy court and the judge would almost certainly approve the transaction. If you disagree on the value, you would have to ask the judge to determine the value. It sounds like this would be a good deal for you, since your car is probably not worth $3700! There are companies that will give you a "redemption" loan. If you want more information, please call me at 617-367-4620.
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