If you wish to redeem your auto loan and keep your car in Chapter 7 bankruptcy the requirement is to pay the replacement value for your car. The same holds true for a loan for your truck, boat, or motorcycle. Additionally, mobile homes not attached or affixed to the land are also redeemable.
Again, redemption is only allowable in Chapter 7 bankruptcy, and officially you must offer a replacement (retail value). Also, sometimes they offer trade-in values using NADA or KBB. However, only personal property is redeemable.
Chapter 7 Bankruptcy • Auto Loan Redemption
In Chapter 13 you might be able to “cramdown” the auto loan, which is similar to a redemption. You can only “cramdown” the car loan in Chapter 13 if the purchase date is more than 910 days ago, you use it commercially, or in Kentucky, if the car loan was refinanced.
When you file Chapter 7 bankruptcy in Kentucky, please take the time to consider think whether or not you want the following to take place:
- Surrender your car, and owe nothing. This is a clear choice if the car is a lemon.
- Reaffirm your car with the bank, through the court, and continue to pay the bank the same payments. This option is only available if you owe less than the auto is worth.
A reaffirmation in Chapter 7 bankruptcy court is a good choice if the following criteria are met:
- You owe less than the wholesale price of the car.
- The interest rate is good.
- You are on good terms with the lender. If you are on poor terms with the lender they might reaffirm and then, repossess the car after your bankruptcy is over and sue you for the deficiency.
Alternatively, you can sometimes do an auto loan redemption and buy it from the bank by filing a motion with the court under Chapter 7 for the replacement value. This option is only available if you owe more than the car is worth.
Bottom line: if you are paying too much for your car you should file a redemption or surrender it. A company named 722 redemptions will often finance it if you don’t have the cash to do the redemption. 722 Redemption saves the average customer $8,000. (Call 722 Redemption at: 1-888-721-2800). You can keep the personal property for replacement value. That includes cars, boats, and mobile homes.
Resources for Bankruptcy
Louisville Kentucky Bankruptcy Forms
Bankruptcy Motion 722 Redemption
How to Manage Your Car Loans in Bankruptcy
Rebuilding Credit After Bankruptcy
If you are thinking about filing bankruptcy, don’t delay because timing is crucial. I am here to help you. So, contact my office right away to start the conversation. Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905
