When you have secured debt, this means that you have property backing up that debt, such as when your car is collateral for your car loan. If you should default on secured debt, then you could forfeit the property to the creditor. Or even if you are on top of your payments, you might still surrender the property in Chapter 7 bankruptcy, that is, give the property to the creditor. If you want to hold on to that property however, you have two options:

• Reaffirm your debt
• Redeem your property

This article will cover the second option. In order for this option to be available, you will usually need an exemption that covers the equity in the property. Otherwise, non-exempt property is likely to be sold by the trustee, with the profits paying off creditors.

How Redeeming Property in Chapter 7 Bankruptcy Works

When you redeem secured property, you are making a lump sum payment to the creditor in order to regain your property. This payment will cover the "replacement value". This value is based on how much it would cost to go to a retailer to buy that type of property in its current condition. Fortunately, this replacement value often comes out to less than the amount of debt. A creditor might not agree with you on what the replacement value really is. In this case, the court may be able to come up with the amount in a valuation hearing. If you go ahead and pay this replacement value, then you own that particular property debt-free.

The Drawbacks & Limitations

The usual difficulty in redeeming property is that of finding funds for the replacement value. A solution might be a company that gives out loans for redeeming property. Another option is to ask the creditor to let you make multiple payments instead of a lump sum payment. The trickier obstacle to this process, however, is that you can redeem property only in the right circumstances. Your situation has to meet all of these criteria:

• The debt is a personal debt, not a business one. You can redeem personal or household property for consumer debt, but if property is collateral for a business debt, or is a company car, then you cannot redeem it.
• The property you need to redeem is not real estate, and it is your personal property.
• The property is not investments or bonds, etc., but it is tangible.
• The property has low equity or none at all and so has been abandoned by the trustee, OR the property is exempted from the bankruptcy.

The Benefits of Property Redemption in Chapter 7 Bankruptcy

Regardless of how high your debt is, if you pay a creditor the replacement value and redeem property, then the creditor has to treat that payment as if you had paid off all of your debt. This is a truly advantageous process if you can pull it off even in a situation where you owe a considerable amount of debt for the property. To learn more about how redeeming property can help you in bankruptcy, contact a local bankruptcy attorney. When you consult a legal professional, you can also learn of other ways you can protect your property from the bankruptcy proceedings, such as taking full advantage of the available exemptions or negotiating with a creditor. An attorney can also help you determine which bankruptcy chapter is right for you, and then help you to prepare for a brighter future after bankruptcy. The expertise of a bankruptcy lawyer can be invaluable for your financial future. Find the qualified legal help you need and deserve on our directory today!