Chapter 7 Bankruptcy · Keep Your Car · Free Initial Phone Consultation
There’s a little-known legal tool called 722 Redemption that can cut your car debt by thousands — letting you buy your vehicle back for what it’s worth today, not the inflated balance you still owe.
If you’re considering Chapter 7 bankruptcy in Florida, you’re probably worried about your vehicle. Many of our clients in Orlando and Seminole County are “underwater” on their car loans — they owe far more than the car is actually worth. Redemption is the tool built for exactly that situation.
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 plain terms: you pay the bank what the car is worth today, and the rest of the debt is wiped out (discharged) right alongside your credit cards and medical bills. Unlike a reaffirmation agreement, where you promise to keep paying the entire original loan, redemption resets the debt to the vehicle’s current fair market value.
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 $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
To use this option in the Middle District of Florida (Orlando Division for most Central Florida residents), 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. Florida’s motor vehicle exemption protects up to $5,000 in equity, and if you’re not claiming the homestead exemption, you can stack the $4,000 wildcard on top.
✔ 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 in cash?” Fortunately, there are specialized lenders who focus on redemption financing and work exclusively with people in Chapter 7. They lend you the money to pay off your original bank in a lump sum, and you start a new, smaller loan with them.
The interest rate on these new loans can be high, but the savings on the total principal are often so large that the monthly payment still 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. Redemption motions in our area are filed in the U.S. Bankruptcy Court, Middle District of Florida — and local practice genuinely matters: valuation evidence, lender response patterns, and financing options differ from district to district. Here are the steps:
1. Valuation: We determine the fair “retail” market value of your car using court-accepted guides like NADA or Kelley Blue Book.
2. 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): if the bank doesn’t object within 21 days, the court approves the redemption without a hearing.
3. Court Order: Once the judge signs the order, we typically have 30 days to send the payment.
4. Fresh Start: You receive the clean title from the old bank, or start your lower payments with the new lender.
Redemption vs. Reaffirmation: Pros and Cons
Pros
Reduces the loan balance to the car’s actual value.
Eliminates accumulated interest from the old loan.
Often lowers the monthly payment.
Lets you keep your vehicle.
Cons
Requires special financing or immediate cash.
New loan 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 may be smarter to surrender it and buy a cheaper one after your discharge. But if you have a reliable vehicle and are simply stuck in a bad loan, this can be your best exit strategy. Not sure which way to go? Compare it with a reaffirmation agreement — and see the full picture of Chapter 7 bankruptcy. ¿Prefiere leerlo en español? La redención 722 en español.
Frequently Asked Questions
Does 722 redemption work in Florida?
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Yes. It’s a federal right under 11 U.S.C. § 722, available in Florida Chapter 7 cases for personal-use vehicles. We file these motions in the U.S. Bankruptcy Court, Middle District of Florida.
Is 722 redemption better than reaffirmation?
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When you owe more than the car is worth, redemption usually wins because it resets the debt to the vehicle’s value. When the loan is reasonable and close to the car’s value, reaffirmation may be the better fit. We compare both against your actual numbers in the consultation.
Do I have to pay the redemption amount all at once?
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Yes — the law requires a single lump-sum payment of the vehicle’s fair market value. Most clients use a specialized redemption lender to fund that lump sum, then repay the smaller new loan over time.
How is my car’s value determined?
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We use court-accepted retail valuation guides such as NADA or Kelley Blue Book, adjusted for your car’s mileage and condition. If the lender disagrees, the court can resolve the value.
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. Se habla español · Falamos português.
Additional Resources
By Juan C. Burgos, Esq. — Florida Bar No. 84056. This article is for general educational purposes and does not create an attorney-client relationship or substitute for individual legal advice. Every financial situation is unique. Juan Burgos Law is a debt relief agency under federal law; we help people file for bankruptcy relief under the U.S. Bankruptcy Code.
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!