Automobile Exemption and Redemption?

[doni49]

I'm wonering what effect (if any) the automotive exemption has on redemption.

Let's take the following hypothetical example.

Loan balance: 22,000
NADA Value: 14,000

Federal Exemptions - (I know the permitted amounts are higher than those listed here I just don't remember the exact numbers right now and this IS just a hypothetical)
Automotive exemption: 3,000
Wildcard (don't own home, homestead exemption applied here): 10,000

Given the this hypothetical, what would be the redemption amount? The 14k NADA value? Or the amount left from the NADA value after the exemptions?

TIA!

[LadyInTheRed]

oops. Misread the question so I deleted my first response.

If this is correct: http://bankruptcy-law.freeadvice.com...redemption.htm

The redemption amount is $14,000. I don't think exemptions have anything to do with it. You don't need to exempt property you have no equity in.

[justbroke]

I'm confused, but let me try. The exemption amount has nothing to do with a Redemption. In a redemption, you pay the current market value of the property. The only thing you need to do, is get the Court to set the value of the vehicle by filing a Motion to Redeem. If the Court grants your Motion, the Court will force the lender/creditor to take the "redemption value" as full satisfaction of the lien.

[doni49]

Thanks both of you. That was my understanding. But then I was reading a Motion to Redeem and as I did so, I was no longer so sure of that.

[currerbell]

I have a semi-related question and can't find an answer anywhere (including my totally worthless attorney). My auto lender is a CU. I spoke to them prior to filing to find out if there was a cross-coll provision (I also had a credit card with them). They assured me that there was not, and that I could keep making the car payments. There were only 4 car payments left at that time. Since they received notice of the BK (with the credit card listed as unsecured debt and indicating my intent to reaff the auto loan), I have continued to make car payments and they have taken them. Last week they informed my attorney that there IS a cross-coll provision and that they will not reaff the auto unless I also reaff the credit card. They claim the car is worth $7,900.00; the car is actually only worth $2,800.00.

If I file a motion to redeem, can I include the two payments I have made since notice of BK was sent to creditor as "payment" toward redemption? Or did I just blow that money away?

[justbroke]

If I file a motion to redeem, can I include the two payments I have made since notice of BK was sent to creditor as "payment" toward redemption? Or did I just blow that money away?

No, it is wasted money unless you owe less than the value of the car. A motion to redeem is for market value or the "balance" or the loan, if it's below market value.

In any event, without getting complex, if you owe a lot more than it's worth, you wasted money because anything about the "redemption value" is toast! Especially interest paid! That's why, if you're going to redeem, you do NOT pay from the time of filing until the car is actually redeemed! Not all lawyers do the math, but the math is rather simple!

Don't worry on the valuation either. Most auto lenders will squawk about the "value" and have an outrageous "market value" for the vehicle. However, it is well accepted (by caselaw) that the value used for redemption is the "liquidation value" and not "market value". Most Courts view a redemption as an "expedited liquidation by auction" and thus, the lender would have received no more than liquidation value... and may even save money from the cost to move, store and auction the vehicle anyhow! (I love smart judges.)

So, when determining value, always use the "trade-in" value as that's the closest to the "liquidation" value. It may actually be lower than the "trade-in" value. I know that my lender, CapOne, complained about my $8,200 redemption value, claiming my vehicle was worth $12,000 (which it is!). However, that's the "retail clean" value and my District ABSOLUTELY goes by "liquidation" value. They later objected, but my opposition woke them up, they called me and said that they could to it for $8,000. Idiots... I was willing to go to $8,200. LOL

[currerbell]

Well, as of today I only owe $900 on the car (it is worth about 2800) - so can I redeem it by just paying that $900 balance? Or does "balance" also include the amount owed on the credit cards? Because if so, they can just eat it. I'm not paying another $2800 toward the car when I only owe $900. I'd rather put that money toward another car.

[currerbell]

Thanks, by the way - justbroke you have been a great help here (and in many other threads!)

[justbroke]

Well, as of today I only owe $900 on the car (it is worth about 2800) - so can I redeem it by just paying that $900 balance? Or does "balance" also include the amount owed on the credit cards? Because if so, they can just eat it. I'm not paying another $2800 toward the car when I only owe $900. I'd rather put that money toward another car.

I would still do a redemption and then argue that the "cross-collateralization" is void and null since the credit card existed prior to the car -- or somesuch. You may get the judge to listen at the hearing! Anyhow, yes it would be $900. You would file a Motion to Redeem and list a value of the balance of $900. Then, at any hearing -- because I'm sure they'll object due to their cross-collateralization -- you argue that the credit card should not be secured by "this" debt.