Glossary

722 Redemption – refers to the section of the Bankruptcy code that allows debtors to keep their vehicles by paying market value to the creditor.

Auction – A clearing house used to sell used vehicles to wholesale buyers such as car dealers.

Bad credit – Your credit history is recorded by the major credit bureaus: Experian, Equifax and TransUnion. A person is considered to have bad credit if they have a history of defaults, late payments or have filed for bankruptcy.

Bankruptcy – A legal filing indicating one cannot pay his/her creditors as agreed.

Chapter 7 Bankruptcy – A legal filing indicating that a person is unable to pay his/her debt. A Chapter 7 bankruptcy is intended to provide relief from unsecured debt.

Chapter 13 Bankruptcy – A legal filing indicating that a person is unable to pay his/her debt during the time frame initially agreed. Individuals who file Chapter 13 are wage earners who have the ability to pay some, but not all, of their debt. Chapter 13 bankruptcy is often considered a reorganization of debt.

Credit score – A numerical expression based on a statistical analysis of a person’s credit files, intended to be a predictive tool to represent the creditworthiness of that individual based on past credit payment history.

Credit bureau – See 'Credit reporting agency'

Credit reporting agency – An organization that collects information about your borrowing and payment histories. Credit reporting agencies furnish information to potential creditors to assess your ability to repay your debts.

Creditor – An entity providing you goods or services for a fee; Creditors accept payment for the good or service after it has been delivered (e.g., auto lender, medical provider, etc.).

Delinquency – Late payment on a loan or lease; delinquency is often measured in months past due (for example, 60 days delinquent indicates the consumer has not paid the amount due for 2 months).

Default – Failure to pay back a loan, lease, or credit card as agreed with the lender.

Discharged bankruptcy – Discharged in the bankruptcy sense refers to clearing the debtor’s slate or all, or most past debts. The goal of bankruptcy proceeding is to obtain a discharge of debts. When a debt is discharged, it is no longer enforceable against the debtor personally.

Dismissed bankruptcy – A rejected bankruptcy filing due to a variety of reasons, including but not limited to: voluntary withdrawal of bankruptcy filing, one does not file the necessary paperwork, incorrect filing of chapter 7 instead of chapter 13, etc.

Down payment – An initial payment offered to the lender to minimize the amount borrowed and show commitment to repaying the loan or lease.

Holding Period – The number of a days a lender holds the car before taking to auction. Cars are usually stored with repossession agencies as they are being prepared for sale at auction.

Reaffirmation – An agreement by the debtor to honor debts that would otherwise be discharged by the bankruptcy. This allows the debtor to keep their vehicle under terms that are often similar to their initial agreement.

Redemption – The act of getting back into your vehicle after the vehicle has been repossessed. A borrower can "redeem" the vehicle during the redemption period by offering the creditor the entire unpaid balance, plus any expenses reasonably caused by the repossession.

Repossession – The act of taking back the collateral used to guarantee a loan or lease. Financial institutions, for example, may repossess an automobile if the borrower is not making payments on the loan as agreed.

Security deposit – A sum of money paid up front to ensure the collateral is returned in good condition. If the returned collateral needs repair, the security deposit is applied to repair cost and not returned to the borrower.

Surrender – An agreement to return the vehicle to the creditor during the bankruptcy proceedings.

Trustee – A bankruptcy trustee is appointed by the government to oversee the bankruptcy case. Trustees are assigned to represent the creditors and ensure the bankruptcy case is proceeding smoothly.

Vehicle lease – A way to finance a vehicle that allows consumers to ‘rent’ a vehicle from the lender. For some leases, the consumer may have the option to purchase the vehicle at the end of the lease for its fair value, which is defined at the beginning of the lease.