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Secured debts and liens
Redemption
A procedure in a Chapter 7 case in which a debtor removes a secured creditor's lien on collateral by paying the creditor the value of the property. The debtor may then keep the property. 1
Talk to a lawyerHow it works
Redemption is for tangible personal property used mainly for personal, family or household purposes, such as a car. The property must be exempt or abandoned, and the debt must be a dischargeable consumer debt. 2
The price is the amount of the lender's allowed secured claim, paid in full at the time of redemption. A claim is secured only up to the value of the collateral, so when the property is worth less than the loan, the price follows the value and not the loan balance. 2 3
For an individual, personal property is valued at its replacement value on the filing date, with no deduction for costs of sale or marketing. 3
You state the choice to redeem on the statement of intention. That statement is due 30 days after filing or on the date of the meeting of creditors, whichever is earlier, and you must carry out the choice within 30 days after the first date set for the meeting. 4
Common questions
Can I redeem by paying over time?
What if I neither redeem nor reaffirm?
For personal property that secures a debt for its purchase price, an individual Chapter 7 debtor has 45 days after the first meeting of creditors to do one or the other. After that the automatic stay ends for the property and the creditor may act as non-bankruptcy law allows, unless the court rules otherwise. 4
Sources
Deciding what to do with a financed car?
A bankruptcy lawyer in your state can compare redeeming, reaffirming and surrendering with you.
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