Redemption: Two Ways the Law Helps You Hold On To Property
People are often concerned about the loss of their home or a vehicle when hard times arise. Although rarely used, Kentucky law offers a way to hold on to a residence, even after it is sold on the courthouse steps. And bankruptcy law offers a way to hold on to a vehicle by paying what it is worth (instead of what you owe).
1. Property sold for less than appraised.
Before real property is sold through a foreclosure sale, it must be appraised. Kentucky law (KRS 426.530) gives the owner of real property a right to redeem, or repurchase, the property if it does not sell for 2/3 of its appraised value. So, if a house appraises for $150,000 but sells for $80,000 at the foreclosure sale, the owner has the right to redeem the property. This right only lasts for six months after the sale date, and you have to pay 10% interest and reimburse the buyer for items such as repairs, utilities, insurance and taxes. However, it offers a way to repurchase the family home, often at a discount. Beware that mortgage lenders often attend foreclosure sales and open the bidding with an amount equal to 2/3 of the appraised value to eliminate this right of redemption. You (or your representative) will have to actually attend the sale to find out, or wait for the sale report.
2. Property isn’t used for business.
Bankruptcy law gives a debtor the right to redeem personal property if it is used for personal, family or household purposes (so you can’t redeem the equipment you use in a business). You have to claim an exemption in the property, or your trustee has to decide to “abandon” it, which means they will not try to sell it. Here’s how it works: if you have a car worth $5,000, but owe $8,000 on it, you can keep the car by paying the lender $5,000. How do you know what a car is worth? You can check sources like the Kelley Blue Book or the N.A.D.A. guides, but it may be worth going to a car dealership and getting a quick written opinion. If you and the lender can’t agree on what a car is worth, the bankruptcy court will hold a hearing and decide the value after hearing from both sides. Beware, that you will have to pay for the car all at once to redeem it, and won’t just be able to keep making payments.
So, redemption isn’t for everyone, but it can help you keep property that you might otherwise lose through a foreclosure or repossession. Each case is different and unique, and you should consult with knowledgeable counsel about your rights when you are faced with such difficult situations. We have helped many individuals with such issues, and look forward to helping you should the need arise.