Typically, the debtor is """"upside-down"""" (the vehicle's value is less than the amount owed on it). In this scenario, if the debtor reaffirms their debt, they will be required to repay the entire loan balance over the life of the loan. However, if the debtor pays the value of the vehicle to the creditor, the debtor can redeem the vehicle and retain it free and clear. The debtor receives a favorable deal, and the finance company receives more than it would if the vehicle was auctioned off and nothing was received for the deficiency owed by the debtor due to bankruptcy.
Procedural Rules
In accordance with section 521(a)(2)(A) of the Bankruptcy Code, the debtor must file a Statement of Intention regarding consumer debt-secured property within 30 days of filing for Chapter 7 relief. Conforming to the debtor's stated intent includes redeeming the property or, if the matter is contested, filing a motion to redeem.
According to section 521(a)(2)(B) of the Bankruptcy Code, the insolvent must redeem the property within 70 to 85 days. (This is due to the fact that debtors have 30 days from the date their petition was filed to submit a Statement of Intention. The debtors then have 30 days to redeem between the first meeting of creditors and the meeting of creditors, which may occur 20 to 40 days after the filing of the petition.
In chapter 7 cases in which the collateral is secured by a purchase money security interest, the debtor has 45 days from the date of the first Meeting of Creditors (Section 341) to either reaffirm the debt or redeem the collateral. If not, the debtor will be in violation of section 521(a)(6) of the Code.
However, creditors have 30 days from the date of the first creditors' meeting to object to exemptions and 60 days from that date to file a complaint for non-dischargability. Since the first meeting of creditors under section 341 must take place within 20 to 40 days of the petition being filed, creditors have between 50 and 70 days to object to exemptions and between 80 and 100 days to file complaints to except debt from discharge. In many instances, the debtor would not be able to redeem property such as a vehicle with only 70 to 85 days.
Payment
If debtors are unable to obtain the essential funds from family, friends, or relatives, they may seek redemption loans from finance companies. Remember that these businesses typically charge larger interest rates.""
" - https://www.affordablecebu.com/
