Understanding the Power of Redemption in Bankruptcy
Good morning, everybody. Edward Kelly here, your bankruptcy attorney in OKC, with another three minutes to financial freedom. In fact, we’re even going to go a little shorter today. We’re going to talk about redemption. We’re going to do a three-part series. What is redemption? How do I do it? And how will it affect me after the bankruptcy?
What is Redemption?
Well, you have a power in a Chapter 7 bankruptcy, something somewhat extraordinary, called the power of redemption. We’re not talking religion here. We’re talking about a motion to redeem property. So, as you might recall from other videos, if you have a secure debt, like a vehicle loan, in a Chapter 7, you can either reaffirm the debt, meaning bring it back so you can keep the property.
For example, if you want to keep the car, you’ve got to pay for it. Or you surrender the collateral, the car, and then you can get rid of the debt, treat it like anything. Any other unsecured debt, credit card debt, medical bill, is just gone in the Chapter 7.
However, you can also pay the value of the collateral to the creditor. Not what you owe them, but the value of the collateral, because that’s all they would get if you surrendered it. You can follow me on this. If you gave that car back to them, they would only receive the value of that car and not a penny more.
So, you accomplish the same thing by paying them the value of the vehicle that you would by giving it to them, and that way you get to keep the vehicle and you don’t owe the rest. So, for example, if you owe $10,000 on your car, but it’s only worth $2,000, you pay them $2,000, and then the other $8,000 is just an unsecured debt that goes away. So, that’s redemption. It’s a pretty major power in a bankruptcy.
Call for a Free Consultation
Of course, how do you have this money when you’re in bankruptcy? As always, you can reach out to me, an Oklahoma bankruptcy lawyer, at oklahomacitybankruptcyattorney.pro.