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Chapter 7- 722 Redemption

Filing for Chapter 7 bankruptcy can allow you to reduce the amount you owe on your vehicle. Under a Under 722 redemption you can seek a court order that allows you to pay your car loan company a lump sump equal to the market value of your vehicle. This means that if your car loan is $20,000 and the market value of your vehicle is $15,000, 722 redemptions court approval allows you to pay off your vehicle by giving your car loan company a lump sump of $15,000. In most instances this can save you money since the market value of a vehicle in most situations is lower that what is currently owed on the vehicle. Of course, most people who are going through bankruptcy do not have a lump sum amount to pay off their vehicles. One option to this problem is to seek a company that works on 722 redemptions, who will finance the lump sump payment. Below are a few companies that work in this area:

US Bank: http://www.722redemption.com/

Fresh Start Loans http://www.freshstartloans.com/

How Does 722 Redemption Work?

Under 11 USC 722 of the Bankruptcy Code you may redeem tangible personal property from a lien through paying the secured creditor a lump sum in a Chapter 7 Bankruptcy. The secured creditor should then release the lien held on the secured property. In order for 722 redemptions to apply the property must be:

  • Tangible personal property intended primarily for personal, family or household use.
    • Items that Generally Qualify
      1. Vehicles
      2. Household Furniture
      3. Household Appliances
  • Pay the secured claim in a lump sum payment
  • The lump sum payment that is required is based on the retail value.
  • Generally for a vehicle it is based on the retail value provided by Edmunds, Kelley Blue Book or NADA.

If you wish to redeem your vehicle in a Chapter 7 bankruptcy then you need to apply for a 722 redemption loan. Generally the interest may be higher due to the risk involved for the lender. Once your have received a 722 redemption loan and are in a Chapter 7 bankruptcy, a motion will be filed to redeem the vehicle. If the motion is granted by the court then the secured creditor will be paid a lump sump amount based on the retail value of the vehicle. The secured creditor must then release the lien held on the vehicle.

Here is a Sample of a 722 Redemption Motion:

Attorney Name or Debtor Pro Se

Address

Telephone

Attorney for Debtors:

Debtor Name

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

LOS ANGELES DIVISION

In re:

DEBTOR NAME

Debtor(s).

DEBTOR NAME

)

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)

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Case No.:

MOTION FOR REDEMPTION UNDER 11 U.S.C. 722

DATE:

TIME:

CTRM:

MOTION FOR REDEMPTION UNDER 11 U.S.C. 722

NOW COMES Debtor, by and through (NAME OF ATTORNEY OR FIRM)., and moves this Honorable Court pursuant to 11 U.S.C. 722 and Bankruptcy Rule 6008 for a Redemption Order and states in support thereof:

I. PROCEDURAL REQUIREMENTS UNDER 11 U.SC. §722

Pursuant to 11 U.S.C. §722, a debtor may, ".. redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted under section 522 of the title or has been abandoned under section 554 of the title" 11 U.S.C. §722.

The item to be redeemed is tangible personal property intended primarily for personal, family or household use, and is more particularly described as (YEAR, MAKE AND MODEL OF VEHICLE, AND VIN#)

The interest of the Debtor(s) in such property is exempt or has been abandoned by the estate and the debt which is secured by said property to the extent of the allowed secured claim of the Creditor is a dischargeable consumer debt.

Here, Debtor has elected to exempt the vehicle as set for under 11 U.S.C. §522. A copy of the Debtor's Schedule C is attached to the motion as Exhibit "A".

II. VALUATION STANDARD FOR REDEMPTION

11 U.S.C. §722 allows a debtor to redeem personal property by paying the holder of a secured lien the amount of the "allowed secured claim" in one lump sum. Under section 11 U.S.C. §506(a) of the Bankruptcy Code , Congress has set the valuation standard for the redemption of a vehicle as equal to the "price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined".

III. PRICE A RETAIL MERCHANT WOULD CHARGE

To determine the value of a vehicle for purposes of redemption, Courts routinely use industry guides as appropriate evidence of valuation. In re Thayer, 98 B.R. 748 (BK W.D.V.A. 1989). As evidence of the value of the vehicle, (NAME OF LAW FIRM) offers an online printout of a (YEAR, MAKE AND MODEL OF VEHICLE) retail value as best evidence of the redemption value of the vehicle (See Exhibit "B", attached to motion). Additionally, (NAME OF ATTORNEY OR LAW FIRM), offers an online printout of NADA Guide Pricing (See Exhibit "C") for (YEAR, MAKE AND MODEL OF VEHICLE). Both forms of evidence are admissible as "market quotations, tabulations, lists, directories, or other published compilations, generally used and relied upon by the public or by persons in particular occupations." Fed. R. Evid. 803(17). Based on the evidence presented to the court the "redemption value", should be determined to be no more than (DETERMINED VALUE) as evidenced by an online printout of Kelley Blue Book, attached as Exhibit "B", and incorporated as is fully stated herein.

Arrangements have been made by the Debtor(s) to pay (NAME OF FINANCING COMPANY) up to the aforesaid amount in a lump sum should this order of redemption be entered.

The (YEAR, MAKE, & MODEL OF VEHICLE) inconsequential value or benefit to the estate.

WHEREFORE Debtor(s) prays this Honorable Court enter an order:

A. Requiring (NAME OF FINANCING COMPANY). to accept from Debtor(s) the lump sum payment of (DETERMINED VALUE) the redemption value, and;

B. Requiring (NAME OF FINANCING COMPANY) to release its lien of record against the (YEAR, MAKE, MODEL & VIN# OF VEHICLE)

C. Allowing Debtor to redeem the subject property by paying to the creditor the redemption amount on or before the 20th day following entry of the order.

Respectfully Submitted,

/s/ ___________________

Name of Attorney

Address

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