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What is redemption?
Redemption means to pay a secured creditor the value of the property
securing its debt. Redemption is only an option for a consumer who owes
a consumer debt. For example, suppose you owe $18,000 on a car that is
now worth just $10,000. The lender is "undersecured," which means it
has a $10,000 secured claim and an $8,000 unsecured claim. You can wipe
out the lender's lien on your car by paying it $10,000. Your personal
obligation to pay the $18,000 will be discharged. Thus, you end up
owning the car free of any lien.
This option makes good sense provided the value of your property is
less than the balance due on your loan. If your property has not
depreciated, and the loan is lower than the property's value, consider
other options for keeping the property, such as paying off the debt or
entering into a reaffirmation agreement.
(Reviewed 11.14.08)
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