Redemption Can Save Your Car in Bankruptcy
Transcript:
One of the worst investments you can make is to buy a brand new car and then to drive it off the lot. Everybody knows the moment you drive it off the lot the car depreciates in value. It's a very common situation for me to meet with people that have purchased a car and the financing is such that they owe much more on the car than the car is actually worth. There's something really cool that we can do to fix this terrible investment in a Chapter 7 Bankruptcy and it makes me pretty excited actually to tell you about this.
This is what we call a Redemption. The sound of that word just sounds good, Redemption. We've got this car; this car was a great car at one time. We wanted to buy it. We took out a big loan to pay for this car but now we're not so in love with the car anymore partly due to the fact that we owe so much money on the car.
What is a Redemption? A Redemption inside a Chapter 7 Bankruptcy is a situation where the car is worth less than what is owed and Chapter 7 Bankruptcy allows a person in this type of Bankruptcy to pay off this car for what the car is currently worth and not what you owe on the car under the contract terms. Now, a lot of people considering Chapter 7 Bankruptcy simply don't have the money, the thousands of dollars that's usually necessary to pay for the car in order to make the original creditor go away and release the title on the vehicle. However, we are able to obtain independent financing from a third party financial institution to obtain the funds and essential create a new loan for the car. This new loan is going to be for what the car is worth and not what you owe. We only do it in those situations where we're able to drop the principle amount owed on the car.
This also will be accompanied by lower monthly payments making the car more affordable in the near term future as well as the long term future. You may be thinking, "I'm filing for bankruptcy. I probably have very bad credit. How am I going to qualify for financing on this car?" There are lenders that specialize in this type of financing. It's going to result in a higher interest rate, usually in the neighborhood of 23-24% but if we're knocking off thousands of dollars off of the principle loan balance and we're able to lower your monthly payments t usually ends up being a good deal for you.
The really cool thing is if you've fallen behind on your monthly payments on your current car loan those monthly payments get rolled into the purchase of the vehicle and to the Redemption payoff. You're essentially starting a new loan in which you will be current and you won't be behind on your monthly payments anymore, the payments will be lower than what they were before and if you're able to pay off the car more quickly you're able to take advantage of that lower principle balance and the higher interest rates won't come back to bite you at all. I really believe in the Redemption process and it is a great option for a lot people that found themselves upside down in a car loan.
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