What Is Redemption?
Redemption allows an individual debtor (not a partnership or a corporation) to keep tangible, personal property intended primarily for personal, family, or household use by paying the holder of a lien on the property the amount of the allowed secured claim on the property, which typically means the value of the property. Otherwise, in order to retain the property, the debtor would have to pay the entire amount of the secured creditor’s debt or enter into a reaffirmation agreement and become legally obligated on the debt again.
When an investor chooses to withdraw money from his investment in an open-ended fund at any point in time, the units are “sold” at NAV (after deduction of Exit Load, if any) to the Fund. When a closed-ended fund completes its tenure, it is redeemed at the prevailing NAV and investors are paid the proceeds thereof.
Redemption allows an individual debtor (not a partnership or a corporation) to keep tangible, personal property intended primarily for personal, family, or household use by paying the holder of a lien on the property the amount of the allowed secured claim on the property, which typically means the value of the property. Otherwise, in order to retain the property, the debtor would have to pay the entire amount of the secured creditor’s debt, do a reaffirmation agreement and become legally obligated on the debt again. The property redeemed must be claimed as exempt or abandoned. With redemption, a debtor can often get liens released on personal household possessions for much less than the underlying debt on those secured possessions. Unless the creditor consents to periodic payments, redemption must generally be made in one lump sum payment to the creditor.
Redemption means to pay a secured creditor the value of the property securing its debt. Redemption is only an option for a consumer who owes a consumer debt. For example, suppose you owe $18,000 on a car that is now worth just $10,000. The lender is “undersecured,” which means it has a $10,000 secured claim and an $8,000 unsecured claim. You can wipe out the lender’s lien on your car by paying it $10,000. Your personal obligation to pay the $18,000 will be discharged. Thus, you end up owning the car free of any lien. This option makes good sense provided the value of your property is less than the balance due on your loan. If your property has not depreciated, and the loan is lower than the property’s value, consider other options for keeping the property, such as paying off the debt or entering into a reaffirmation agreement. (Reviewed 11.14.
