In a Chapter 7 liquidation case, an individual debtor may redeem certain “tangible personal property intended primarily for personal, family, or household use” that is encumbered by a lien. To qualify, the property generally either (A) must be exempt under section 522 of the Bankruptcy Code, or (B) must have been abandoned by the trustee under section 554 of the Bankruptcy Code.
If it is the intent to redeem your debt that means you can pay a creditor what your personal property is worth now instead of what you owe on it. For example, if your car is worth $5,000 and you owe $7,000, you would only pay the creditor $5,000 in exchange for keeping the car and can save you several thousand dollars if you owe a lot more than the car is worth.
This is a very appealing option to many however the payment must be a lump sum. If this is an option that works for you, it could save you a lot of headaches and free up enough of your income to get you back on track. There are companies out there that do redemption loans so you actually don’t have to come out of pocket with the lump sum payment; of course, incurring more debt is something that should be done with a good deal of care and thought.