Redemption is one of three options for personal property in Chapter 7 bankruptcy.

You may be permitted to “redeem” collateral by making a one-time lump sum payment equivalent to the value of the personal property.

For example, if a debtor owes $10,500 on a car and it is only worth $6,000, if successful on a motion to redeem, the debtor can obtain clear title to the car by paying the creditor $6,000. Most debtors cannot use redemption as a method to retain the collateral due to having to come up with a lump sum of cash. Redemption of consumer items that depreciate rapidly, such as furniture, may also be available. There are also loan companies that may loan a debtor the funds needed to redeem a car. This is usually at a high rate of interest, but since the redemption lowers the principal balance, sometimes, this is financially beneficial to a debtor and can result in a lower payment.