If you are considering Chapter 7 Bankruptcy in Florida, you are likely worried about your vehicle. Many of our clients in Orlando and Seminole County find themselves “underwater” on their car loans, meaning they owe far more than the vehicle is actually worth.
Did you know there is a little-known legal tool called 722 Redemption that could allow you to slash your car debt by thousands of dollars? Unlike a Reaffirmation Agreement, where you promise to pay the entire original loan, redemption allows you to buy your car back for its current fair market value.
What is “722 Redemption” in Bankruptcy?
Under 11 U.S.C. § 722 of the U.S. Bankruptcy Code, an individual debtor can “redeem” tangible personal property (like your car) intended for personal use. In simple terms: you pay the bank what the car is worth today, and the rest of the debt is wiped out (“discharged”) along with your credit cards and medical bills.
Practical Example:
Imagine you owe $18,000 on your Ford F-150, but due to wear and mileage, the actual retail market value is only $9,000.
With a Motion to Redeem, you could pay the bank just the $9,000. The other $9,000 of “negative equity” is completely eliminated. You save half the debt and keep the truck!
Requirements to Qualify in Florida (2025-2026)
To take advantage of this option in the Middle District of Florida (Orlando, Sanford, Tampa), you must meet four conditions:
- Consumer Debt: The loan must be for a personal vehicle, not a business one.
- Tangible Personal Property: Applies to cars, trucks, and motorcycles, not real estate.
- Vehicle Exemption: The car must be protected under Florida exemptions or have been “abandoned” by the Bankruptcy Trustee.
Important 2026 Note: Thanks to new state laws, the motor vehicle exemption in Florida has increased to up to $5,000 in equity for those not protecting a home (Homestead), making this process easier. - Lump Sum Payment: This is the catch. You must pay the market value in one single payment. You cannot make monthly payments to the original bank.
How Do I Pay the Lump Sum if I’m Bankrupt?
This is the most common question. “If I’m broke, where do I get $9,000 cash?”
Fortunately, there are specialized lenders who focus on redemption financing (such as 722 Redemption Funding). These lenders work exclusively with people in Chapter 7 Bankruptcy. They lend you the money to pay off your original bank in a lump sum, and you start a new loan with them for the lower amount.
While the interest rate on these new loans can be high, the savings on the total principal is often so large that the monthly payment drops significantly.
The Legal Process in the Middle District of Florida
At Juan Burgos Law, we handle this process routinely for clients in Seminole and Orange County. Here are the steps:
- Valuation: We determine the fair “Retail” market value of your car using court-accepted guides like NADA or Kelley Blue Book.
- Motion to Redeem: We file a motion with the Bankruptcy Court. In the Middle District of Florida, we use a “Negative Notice” process (Local Rule 2002-4). This means if the bank doesn’t file an objection within 21 days, the court approves the redemption without a hearing.
- Court Order: Once the judge signs the order (view sample order here), we typically have 30 days to send the payment.
- Fresh Start: You receive the clean title from the old bank or start your lower payments with the new lender.
Pros and Cons
✅ Pros
- Reduces the loan balance to the car’s actual value.
- Eliminates accumulated interest from the old loan.
- Often lowers monthly payments.
- Allows you to keep your vehicle.
❌ Cons
- Requires special financing or immediate cash.
- New loan interest rates can be high (sometimes over 20%).
- Additional legal fees to file the motion.
Is Redemption Right for You?
722 Redemption isn’t for everyone. If your car has serious mechanical problems, it might be better to surrender the car and buy a cheaper one after your bankruptcy is discharged. But if you have a reliable vehicle and are just stuck in a bad loan, this can be your best exit strategy.
Additional Resources
Want to know if you qualify to lower your car payment?
At Juan Burgos Law, we evaluate your vehicle for free as part of your bankruptcy consultation.
Gracias a su apoyo pude organizar mi situación financiera y atravesar este proceso con confianza y esperanza.
Lo recomiendo 100 % a cualquier persona que necesite un abogado de bancarrota responsable, comprometido y verdaderamente interesado en ayudar a sus clientes.
¡Mil gracias por todo, abogado Burgos!
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