By explaining secured debt and redemption I hope to show people that they have many options when it comes to handling their debt during a Chapter 7 bankruptcy.
Queens, NY (PRWEB) March 04, 2013
Queens bankruptcy attorney Bruce Feinstein, Esq. handles many Chapter 7, or “liquidation” bankruptcies in New York. In this form of bankruptcy an appointed trustee sells a debtor’s non-exempt assets, with the proceeds going to the client’s creditors. The individual’s debt is then eliminated or drastically reduced. Mr. Feinstein tells his clients that certain exemptions can protect their assets during this form of bankruptcy. In Chapter 7 proceedings they can also keep certain secured property by paying the replacement value of it to creditors. This approach is especially helpful to clients who owe more on their loans than the current value of their property. Mr. Feinstein goes into more depth about secured debts, the realities of redemption, and Chapter 7 bankruptcy. He aims to educate people about Chapter 7 and show them the best ways to get themselves out of debt while keeping as much of their essential assets as possible.
If a client has a “secured debt”, this means that the debt is backed by a piece of property to guarantee payment. If the client does not repay the debt of falls behind on payments, the creditor can take the property as collateral. Some examples of secure debts are car loans and home mortgages. During a Chapter 7 bankruptcy, an individual can work with a bankruptcy attorney to decide how to handle secured debts. Some people may decide to surrender the property. Or, they may want to keep it by reaffirming the debt, or by redeeming the property. For this to happen, the property must be protected by an exemption. There are various federal and state exemptions, which a Queens bankruptcy attorney can help review with a bankruptcy client.
When it comes to redeeming property during a Chapter 7 liquidation, Mr. Feinstein explains that the client is basically buying back the property from the creditor. There are several factors to take into account during this procedure. The amount paid is known as the replacement value of the item, which factors in the age and condition of the property at the time of the redemption. This is usually less than the debt owed, and the creditor may not agree with the replacement value. In that case, the court will hold a hearing to decide the final value, or amount owed. Once this amount is paid, the client owns the property and it is no longer secure debt.
However, Mr. Feinstein adds that there are some disadvantages and restrictions when it comes to redeeming property in addition to it being exempt. The debt must be associated with goods for personal use and not business purposes (eg., a car may be a secured debt, but a company car is not). The property must also be tangible; property such as stocks and investments are not tangible. And a disadvantage to redeeming property is the cost of redemption. If a client is already in debt, buying back the property may not be feasible, or rational.
Mr. Feinstein often works with clients to decide whether or not redemption during Chapter 7 bankruptcy is the best option. Sometimes the secured debt is larger than the value of the property. In this case, the creditor can accept the replacement value as full payment for the debt, even if it is less than the amount owed.
By explaining secured debts and redemption, Bruce Feinstein, Esq. aims to show people that they have many options when it comes to handling their debt during a Chapter 7 bankruptcy. A liquidation bankruptcy is not a total loss of property; it is a way to work with creditors to find a manageable path towards becoming debt-free.
Visit the Law Offices of Bruce Feinstein, Esq. at bfeinsteinesq.com or call (718) 514-9770 to reach his New York office.