In some Chapter 7 bankruptcy cases, a section 722 redemption might be a good idea. Section 722 of the Bankruptcy Code allows a debtor to redeem collateral (like a car) for the amount of the secured claim.
Section 722 states, ” An individual debtor may, whether or not the debtor has waived the right to redeem under this section, 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 this title or has been abandoned under section 554 of this title, by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption.”
Lets say I have a client from Hiram, Georgia who owes 15,000.00 on his vehicle to Rip Off car creditor. In this example, lets say the Hiram client’s vehicle is worth 15,000.00. If this Hiram client is paying a high interest rate, it might be beneficial to get a company like 722 Redemption to finance his redemption of the vehicle.
I can understand how some clients get desperate for a car and buy some junker from a buy here pay here so that they can get back on the road. However, a 25 percent interest rate on a car note is almost slavery (Yes, 25 percent interest is legal in Georgia). For example, if you borrow $15,000 at 25 percent interest over five years, you will pay a total of 26,416 for the car. What a rip-off!!!
I refuse to allow my clients to reaffirm these types of loans. The purpose of Chapter 7 is to get a fresh start. How can you get a fresh start if you strap yourself down with some 25 percent interest loan? What if you reaffirm the car at 25 percent interest and then the car goes kerplunk? All Georgia Chapter 7 debtors should have a serious discussion of any reaffirmation agreement with their bankruptcy attorney.
A Section 722 redemption at a decent interest rate might be a better alternative for Georgia bankruptcy clients.