Overland Park Bankruptcy Attorney
It is not well known, but a debtor in a Chapter 7 bankruptcy can redeem secured property using Section 722 of the Bankruptcy Code. What does it mean to “redeem” property? Redemption means that a secured debt on some secured collateral (e.g., car, boat, trailer, furniture, etc) can be paid off completely by paying the loan to the fair market value of the collateral, rather than the full loan balance. In the process, the debtor can save literally thousands of dollars.
In a Chapter 13 bankruptcy, secured and unsecured loans are treated differently. In a Chapter 13 bankruptcy, secured debts (i.e., loans with a security interest, such as a loan on a house, car, boat, trailer, etc.) are treated in different ways.
In some circumstances, a debtor will not have to pay the full loan balance of the asset in question, such as a car, boat, or piece of investment real estate. In these circumstances, a debtor would only have to pay what the the collateral is worth, not what is owed on it (unless, of course, what is owed is less than the value of the collateral).