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If you have an automobile loan and you file Chapter 7 bankruptcy, you have the following options:

You can retain the vehicle by “reaffirming” the loan and continuing to make your regular payments; or

You can surrender the vehicle to your lender within approximately 2 months after you file bankruptcy; or

You can “redeem” your automobile under Section 722 of the U.S. Bankruptcy Code by paying the creditor a lump sum payment equal to the vehicle’s fair market value (FMV). This can be particularly beneficial if your automobile loan substantially exceeds the current value of your car. For example, if the balance of your automobile loan is $18,000 and your car is worth $12,000, you can obtain an order from the court to pay the creditor the $12,000 and the remaining balance will be “discharged” (forgiven). Past due payments are also forgiven.

If you don’t have the funds in a 401(k), a tax refund, or elsewhere to pay off the current value of your automobile to redeem it, there’s a company in Ohio named 722 Redemption Funding that specializes in paying the redemption amount for Chapter 7 debtors nationwide. There’s little to no credit check. They will put a lien on your automobile until you fully pay off their loan. But you may save thousands of dollars on the amount you pay for your automobile.