Riverside, California is in the heart of the car capital of the United States – if not the entire world. Look down any street in Redlands, Canyon Lake or even Corona, for that matter, and you will see rows of beautiful new cars in parking lots and driveways all around you. Most of those car owners are making large payments on their cars, so here’s a tip for those who need to file a Chapter 7 bankruptcy case and also want to reduce their car loan balance and payments.
Many bankruptcy attorneys know that a debtor (borrower) may redeem a car when filing a Chapter 7 bankruptcy case. Redemption is a right granted under Bankruptcy Code Section 722 that gives the borrower the right to purchase an asset at its current fair market value when a Chapter 7 case is filed.
Most borrowers don’t have the available cash to buy their car out of the Chapter 7 bankruptcy estate, though. So, it would seem that Bankruptcy Code redemption doesn’t help most borrowers.
What most debtors – and even many bankruptcy attorneys – don’t know is that there are actually a few lenders that will give borrowers a new loan on their car – while in bankruptcy – to pay for a redemption of the car. So, many borrowers who otherwise wouldn’t be able to redeem their cars now can.
You might ask, “Why would a person want to take out a new loan to redeem their car”?
There are two really good reasons: The new car loan will be for the current fair market value of the car (almost always less than the balance of the existing car loan), and the payments will also be lower.
Often times redemption lenders are able to help a borrower “purchase” the car back for as little as one half the current loan balance and with one half the current car loan payments. If this seems like a good deal for you, you should ask your bankruptcy attorney about it…
