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Articles Posted in Repossessions and Bankruptcy

Redemption is a bankruptcy process that is often overlooked and under utilized by many Louisville and Southern Indiana bankruptcy bankruptcy filers. Redemption is the process of paying a lump sum to a creditor in a Chapter 7 Bankruptcy in exchange for a release of its lien on some personal property, such as a car or household items. The money paid to the creditor must equal the fair market value of the property that serves as collateral for the loan.

Here is how the process works. Suppose you own a car with that is worth $2,000 but the loan balance on the car is $6,000. If you Reaffirm the note on the car, you will be paying $6,000 plus interest for a car that is only worth $2,000. Would you buy a $2,000 car for $6,000? I doubt it. But that is in effect what you are doing if you reaffirm. The redemption option, on the other hand, would allow you to pay only what the car is worth. But the kicker is that you have to come up with the money in a lump sum. There are, however, companies that will loan you money to pay off the redemption amount, in effect giving you a new loan with a smaller balance.

The way it works is that the debtor files a motion to redeem the property for 2,000. The creditor then has an opportunity to object. The only basis for objecting would be if the creditor believes that the property is worth more than what the debtor is offering to pay. Most of the time the creditor will not object because it would rather have the money than take the car back and have to sell it. So if the creditor does not object, the court will enter an order allowing the debtor to redeem for 2,000 and the debtor then has 10 days to pay the money. Upon payment of the money, the debtor gets a free and clear title to the car.

MY CAR HAS BEEN REPOSSESSED. HOW CAN I GET IT BACK?

istockphoto_3994247-tow-truck.jpgEveryone knows that if you do not make your car or truck payments, the creditor will send someone out to repossess the vehicle. In most states, including Kentucky and Indiana, the creditor can exercise what is called “self-help.” This means that the creditor need not file any type of legal proceeding with a court, but rather, can simply hire some thug to sneak over to your house in the middle of the night, hot wire your car and drive it off. So you could get up in the morning for work and find your car gone. They can even come to your place of employment and swipe your car. The worst part is they don’t even have to let you know they’re going to do it.

One way to avoid this is to keep your car locked in a garage or keep your eye on it 24 hours a day. The repo guy is forbidden by law from breaking into a locked garage or “breaching the peace.” So if you are with your car when he comes to repo it, you can simply tell him to leave, for it is illegal for him to provoke a physical confrontation or take it against your will while you are there trying to prevent it.

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