You need to know if you file for Chapter 7 bankruptcy in Iowa, you may keep your car under the auspices of a car loan redemption.
Filing for bankruptcy is not easy. There are many things you may face giving up. Many people think they will have to give up their car. In part, this is a myth, because if you have applied for Chapter 7 bankruptcy in Iowa, or are currently considering filing, you may be able to keep your vehicle thanks to the 722 Redemption, also referred to as a car loan redemption.
While this may sound great on the surface, as with anything legal, there are rules and exceptions to understand in this process. The 722 Redemption lets you keep your vehicle instead of running the risk of having it repossessed or taken away to help pay your debt. What if you are in more debt than your car is actually worth? Even in cases like that the 722 Redemption could make things easier for you to handle. Whether or not this applies will be largely dependent on your particular situation.
This particular provision basically says that if a Chapter 7 applicant is overturned on their loan or is in more debt than the vehicle is worth, they may make arrangements for the courts to pressure the lender to give up the lien on the car to enable the bankruptcy applicant to get outright ownership of the vehicle in question. There is a catch – the filer must repay the car’s value, in cash, to the lender.
An example would be a truck valued at $6,000 and the amount owed to the lender is $11,000. This would mean finding $6,000 to pay the lender to get the lien. It goes without saying that the vast majority of bankruptcy clients do not have that kind of money lying around and could not get it to pay their car loan either. One alternative is to find a law firm that works with 722 redemption loans and finance the sum – in the example that would be $6,000.
What are the advantages to getting a new loan? It acts to reduce the filer’s monthly payments and the remainder of the loan, allowing them to keep their car and get a fresh new start. It is an attractive alternative if it things can be arranged to make it happen.
You should also know that the 722 Redemption has to be authorized by the bankruptcy court and managed by your bankruptcy lawyer. However, once that happens, your monthly payments are lowered, as is the remainder of your loan. Legal fees are typically included in the loan. It is a pretty appealing alternative and one that should be discussed with your bankruptcy lawyer.