As most know, your car begins to lose value from the moment you drive it home from the dealership. Most cars depreciate at a rate of 15 to 20 percent per year. Further, if you buy a new car you are paying the retail price. As soon as you drive it home it is worth the wholesale price, a significant loss in value.
A lot of the clients I meet with have vehicles in which they are upside down – they owe way more than the car his worth. For those looking to file a chapter 7 bankruptcy you can get your car by paying what it is worth, not what you owe. This process is known as redemption and is found under 11 U.S.C. § 722 of the bankruptcy code. For instance, if you have a truck that you owe $40,000 but as of the date you are filing bankruptcy it is only worth $18,000, in a chapter 7 bankruptcy you can “redeem” your vehicle for the $18,000, saving you $22,000 on the price of the vehicle.
There must be a catch? Kind of. In order to be able to redeem your vehicle for the fair market value you will have to pay the full amount immediately. In using our example most people don’t have $18,000 in the bank, otherwise they wouldn’t be in bankruptcy! However there are lenders out there that will loan to people in bankruptcy so that they can pay the redemption price of the vehicle. Then you owe the new bank, but at the reduced amount.
In my practice we use a company called 722 Redemption (www.722redemption.com ). They are backed by US Bank and in my experience have done a pretty good job at getting people these loans.
I am an Arizona bankruptcy attorney and I offer a free bankruptcy consultation where we can discuss your specific situation. I can be reached at (480) 464-1111.