What is 722 Redemption Funding, Inc.'s role in the disbursement of attorney fees?
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.
What is 722 Redemption Funding, Inc.'s role in the determination of attorney fees?
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.
Are attorney fees a way of inducing attorneys to file redemptions?
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.
Does 722 Redemption Funding, Inc. recommend that attorneys charge attorney fees?
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.
Is 722 Redemption Funding, Inc. a predatory lender?
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.
On average, how much time does an attorney spend securing a redemption for his client?
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.
What steps does 722 Redemption Funding, Inc. take to protect Chapter 7 debtors in the loan process?
The steps taken by 722 Redemption Funding, Inc. to protect Chapter 7 debtors are many:
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A redemption loan will never be processed if a Chapter 7 debtor is not saving money versus a reaffirmation.
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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.
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All funds borrowed at the debtor’s request for legal costs are disbursed strictly in adherence to the debtor’s instructions.
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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.
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Our loan process is completely transparent for debtors, attorneys, trustees and judges.
In the event debtors borrow additional funds for legal costs, when is the attorney paid for legal work?
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.
Why are these values different from the wholesale values (from N.A.D.A. and KBB) we have been using for the past several years?
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.
