What can you do if you are filing a chapter 7 bankruptcy and have an upside-down car loan? Well, you have three options. You can reaffirm, redeem, or surrender. In this article we talk about how auto redemption in bankruptcy works, and why it may or may not be the right choice for you.
Is Auto Redemption the Right Choice?
In simple terms redeeming your auto loan in a chapter 7 bankruptcy means paying the lender the fair market value of your vehicle, no matter what you owe. Meaning, if you have a loan balance of $20,000 but your car’s Kelley Blue Book value is only $14,000 then you can pay the lien holder the fair market value of $14,000 and keep your car.
What's the catch? The problem with vehicle redemption is you need to have the money in a lump sum, and considering you are going through bankruptcy that is not likely. There are "redemption lenders" that are willing to give loans for the lump sum of money, but often the interest rate is very high. In some cases the higher interest rate is worth it, but in other cases you could be putting yourself into another financial burden. So what do you do?
Getting Auto Financing After Bankruptcy
One thing you can do is to surrender the car in the bankruptcy. I know it seems crazy, you need a vehicle right? But hear me out. The chapter 7 process only takes a couple months to be discharged and once you have been discharged you can apply for auto financing, and get a reliable, affordable older model car. You will be right-side-up on the loan, and have a payment more suitable to your income. Use our bankruptcy auto loan calculator to see what kind on monthly payment you can afford.
Where do you apply for one of these loans? Here at Bankruptcy Auto Financing we specialize in car loans online for bankrupt people. Although, we are not a direct lender we have a nationwide network of subprime lenders that are willing to work with your situations and years of experience in bad credit auto loans. You can start today by filling out our online application to see if you are pre-approved.
Remember we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.