Frequently Asked Questions
722 Redemption Funding is strictly a disbursement mechanism. If an attorney charges an additional fee for securing a redemption loan, the amount of that fee is obtained from attorneys on every redemption loan, and disclosed to the debtors on the loan contract. Debtors, and only debtors, determine to whom fees are disbursed – to the attorneys directly or to themselves.
If the debtor elects for the attorney to be paid directly, the process is handled as follows: Upon the debtor returning the new redemption contract, fees are placed into the Client Attorney Escrow Account where they remain until the debtor signs and has notarized the attached Acknowledgment and Authorization for Release of Attorney Fees from Client/Attorney Escrow Account form.
None. The attorney fees are determined by the attorneys, not 722 Redemption Funding. Only individual attorneys and his or her client determine what, if any, fees should be included in the debtor’s new redemption loan.
An attorney’s fiduciary duty is to act in the best interest of each client. If a redemption loan saves his or her client money, it could, and should, be considered a dereliction of an attorney’s fiduciary duty to not pursue a redemption loan.
Additional fees for redemptions, as always clearly stated in the retainers of ethical and responsible attorneys, are charged regardless if the fees are financed through the debtor’s redemption loan. Financing of attorney fees is therefore a debtor-friendly alternative allowing debtors to benefit from a redemption loan when otherwise not possible.
No, ironically, as the amount of any loan increases, the loan becomes riskier. Allowing debtors to borrow additional funds for legal costs serves no other purpose than providing equal opportunity access to the benefits of our Redemption program to those who otherwise could not afford the additional legal costs.
As stated above, attorneys have their own independent fee schedules that are mutually exclusive from our program. Our lenders provided the no out-of-pocket cost option strictly as a service to those debtors benefiting from a redemption loan only in response to feedback from the bankruptcy community.
Also, since 722 Redemption will only fund redemption loans when the sum of redemption payments (inclusive of all fees) are less than a debtor would have under a reaffirmation agreement, the slightly higher payments resulting from attorney fees prevent some redemption loans.
722 Redemption Funding, Inc. has set itself apart from the growing number of predatory lenders entering the redemption financing business. Our lenders offer an extraordinary opportunity to re-establish credit with no penalty for early payoff. Additionally, 722 Redemption Funding will refuse to finance a redemption loan to any debtor that does not save money (inclusive of any and all fees) when compared to a reaffirmation on the same vehicle.
While we can not say for certain how much time is involved in any redemption, there is much more involved than simply filling out and filing a form. From our decade of experience in financing redemptions for Chapter 7 debtors, we have put together the attached Attorney Checklist with the goal of obtaining the highest level of due diligence by the debtor's bar. While clearly not a requirement, many attorneys have told us they follow this checklist closely.
The steps taken by 722 Redemption Funding, Inc. to protect Chapter 7 debtors are many:
- A redemption loan will never be processed if a Chapter 7 debtor is not saving money versus a reaffirmation.
- All fees are disclosed on the loan contract, and clients are requested in writing to call to discuss all loan paperwork and go over contracts line by line.
- All funds borrowed at the debtor's request for legal costs are disbursed strictly in adherence to the debtor's instructions.
- All funds borrowed by a debtor for legal costs are placed in a client/attorney escrow account until the debtor sends written request for disbursement.
- Our loan process is completely transparent for debtors, attorneys, trustees and judges.
Our fail safe system ensures that attorneys have completed all necessary legal work and have secured a successful redemption for their client, prior to any fees being disbursed. This, when combined with the above-mentioned Authorization and Acknowledgment form, guarantees that attorneys are paid only when his or her client confirms that all work has been completed and consents to the amount of the fee.
Up until the Bankruptcy Reform Act of 2005, an overwhelming string of case law had determined a vehicle's liquidation value was the appropriate standard for redemption in a Chapter 7 case. The new code, via 11 U.S.C. 506 (a) (2), replaced this with the following:
If the debtor is an individual in a case under chapter 7 or 13, such value with respect to personal property securing an allowed claim shall be determined based on the replacement value of such property as of the date of filing of the petition without deduction for costs of sale or marketing... replacement value shall mean the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined.
As the N.A.D.A. and KBB books use values based on vehicles post-reconditioning and in ready-for-sale condition, they do not represent the purpose of the new code and its intent of "...considering the age and condition of the property at the time value is determined." As a result, they have been replaced with more accurate valuation services.
The majority of Courts have concluded the NADA or KBB retail valuation is the appropriate starting point in determining an automobile's replacement value for purposes of a Motion to Redeem. See In Re: Morales, 387 B.R. 36 (Bankr.CD.CAL 2008); and In Re: Ortiz, No. 06-16243-BKRBR (Bankr.S.D.Fla.Fed.27 2007). From there, it is appropriate to subtract the retail cost of repairs. The remaining value is the true and accurate replacement value of your clients vehicle, under guidance of 506(a)(2). After thorough discussions with your client's, we will use retail valuations from KBB or NADA and subtract the retail cost of repairs.in order to determine the replacement value.
These retail values include a standard markup added to the wholesale value. Dealers often spend several hundred, even thousands of dollars reconditioning a car to make it more attractive to sell. Additionally, dealers allow for negotiating. Since the Bankruptcy Reform Act very clearly states the redemption value is to consider the specific car in the current specific condition, we do not add for such allowances as they are not representative of the car as it is currently. However, in most cases, we will use actual dealer advertisements to support the retail values we send you.
Our litigation support team stands ready to help you defend the values we provide to you. Simply call us as soon as you receive the objection and we will arm you with the tools necessary for a successful valuation hearing or creditor direct settlement.