Jacksonville residents have several options when it comes to dealing with secured assets when filing bankruptcy. They can redeem the property by paying the creditor it’s fair market value, reaffirm the debt by offering the creditor the same loan terms or surrender the item by giving it back to the creditor.
Redemption is an attractive choice for debtors because it allows them to pay what a secured asset is worth instead of what they owe on it. There can be a significant savings here as vehicles plummet in value as soon as they roll of the car lot. However, there are two conditions precedent that often get in the way.
First, if the car is being used for personal consumer use, the date of purchase (or refinance), must be longer than 910 days before filing the bankruptcy to redeem. If the car was purchased for business use, there is no waiting period. The second, and more difficult issue, is that the money to pay for the vehicle’s value must be paid for at the time of redemption. This is a problem because the debtors are bankrupt and rarely have enough cash to meet the payoff amount.
The unique possibility here comes into play when the case involves a married couple and only one spouse is filing. If the vehicle is financed in the name of the spouse who is filing bankruptcy, the filing spouse may still opt to redeem the vehicle and keep it paying only the fair market value by having the non-filing spouse finance the redemption. Even if the non-filing spouse doesn’t have cash in the bank, they could still attempt to get a signature loan and use those funds to finance the redemption. In effect, this is a chance to refinance a vehicle and reduce the principle at the same time. I also want to note that it doesn’t have to be a spouse who helps refinance the vehicle -it can be anyone whose willing to put up the cash on behalf of the bankrupt person, so parents and friends can work too.
If you have questions about bankruptcy and would like to set up a free initial consultation, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.