Debtors in Chapter 7 generally have three ways to deal with secured debts — reaffirm the debt pursuant to §524, surrender the property to the lender, or "redeem" the property by paying the secured lender the value of the collateral. (For now, we’ll leave discussion of the ride-through for another occasion).
It is common for individuals in Bankruptcy to find themselves in a situation in which they are "upside down" on a loan and the loan balance is far higher than the value of the collateral. A reaffirmation means the debtor pays back the entire loan balance, plus interest, regardless of the value of the collateral. That is, if the debtor qualifies for reaffirmation.
Redemption sounds like a good idea for many people who want to keep the property, such as a vehicle that allows them to get to work, but the reality is that individuals in bankruptcy do not have several thousand dollars available to redeem. This is where redemption lenders come in, and according the Professor Hayes it may be a good deal. If anyone has experience with them, please leave a comment.