Your Upside Down Car Becomes a Win-Win

By admin • June 17th, 2010

The general rule going into bankruptcy is that the debt attached to the asset follows it around like a lost puppy.  The most obvious choices are keeping the asset with the debt or surrendering the asset to get rid of the debt.  Where the amount owed is significantly more than the value of the property (like most cars), but the asset is important to daily life, neither choice is very appetizing, both sound like a lose-lose proposition.  Enter the third, lesser known option, Redemption.

Redemption is available for all personal property primarily used for household purposes, but it works especially well with cars.  If you’ve owned the car more than 910 days, you have the option of paying the value of the car in a lump sum and owning it outright.  Wait, wait, before you stop reading thinking, “if I had that kind of cash I wouldn’t be reading this blog.”, there are companies that lend the lump sum necessary for just these types of situations.  As you can imagine, credit scores are moot and the interest rate is higher, but when the principal balance is brought in line with the value of the car, there is generally significant savings.  Also, there’s no penalty for early payoff so after your fresh start you can take all the money you’d been throwing down the vast pit of credit card debt and own your car free and clear – that’s a win-win.

 

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