If you are planning on filing a Chapter 7 bankruptcy, you might be concerned about keeping certain property, such as furniture or jewelry. If you owe more on the loan than these secured pieces of property are worth, paying the creditor the actual value of it might be worth it. Of course, before you decide to redeem secured property, you should take a moment to learn more about the pros and cons of redemption to make the decision that best suits your needs.
Secured Debt and Property Redemption
When you make a substantial credit purchase, the lender typically asks that you put up the purchased property as collateral. If you cannot pay back the debt, the lender can take the property and sell it at auction to pay down the loan. When you file for a Chapter 7 bankruptcy, you are required to tell the creditor and the court what you plan to do with your secured property.
Here are some of your options:
- You can redeem it by paying back its value in a single payment
- You can keep it if you are current and can continue to make monthly payments
- You can return it to the lender
What You Should Know About Property Redemption
If you wish to redeem your property in a Chapter 7 bankruptcy, you must do so in one lump sum payment. Additionally, if you and your creditor disagree on the value of the property, the court will schedule a valuation hearing to determine the item’s value. Once you pay the creditor the actual value of the property, you will own it.
That said, there are some restrictions on property redemption. You will have to meet these conditions:
- The item is exempt or it is not of value in your bankruptcy case
- The item is personal property, which excludes real estate
- The item is tangible
- The debt is consumer debt for household or personal purposes
Should I Redeem My Property?
The main disadvantage with property redemption is the one lump sum payment. Even if the value of the item is significantly less than the debt you owe on it, redeeming it might still be challenging if you cannot pay back the amount in full. However, if you can make the lump sum payment, the creditor will have to accept the item’s value as payment in full, no matter how much you owe on the debt.
Schedule a Consultation with a Bankruptcy Attorney Today!
If you are struggling to pay off your debts, a Chapter 7 bankruptcy can help you achieve the financial relief you need and allow you to begin rebuilding your credit. However, the process can be complex, so you will need an experienced bankruptcy attorney to guide you through it. At the Law Office of Kimberly A. Sheek, our bankruptcy team has the knowledge and skill to get you through this difficult experience, so you can move forward into a better, brighter future.
Reach out to our law office today at (704) 842-9776 to schedule a consultation and learn more about your options.