redeem

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Redeem has multiple definitions:

(1)  In bankruptcy, the debtor’s right to repurchase property they previously owned but another acquired in a forced sale by a creditor. 11 U.S.C. § 722 lays out the process through which a debtor may redeem property, stating: “[a]n individual debtor may. . . redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is [dischargeable under § 522] of this title or has been abandoned [under § 554]. . . by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption.”

(2) In securities law, the repayment of a fixed-income security (e.g. bond) at or before the maturity date. For example, a corporation issues a corporate bond with 5% interest annually with a principal of $1,000. They issue the bond on January 1st, 2020, and its maturity date is January 1st, 2030. If a holder of the bond wants to discharge the corporation from their obligation to pay 5% annual interest and repayment of the $1,000 principal on January 1st, 2030 in return for a lump sum payment, he may redeem the bond. The redeeming holder also generally receives more than the bond’s nominal principle, or par value, since they are foregoing their right to receive additional future interest payments.

(3) In real property law, the debtor’s payment on a defaulted mortgage after foreclosure so that the debtor can eventually regain possession of their property. Some states give the debtor a certain amount of time to redeem the property after foreclosure. In California, for example, Code Civil Proc. § 729.030 allows a debtor to redeem their property after foreclosure under two circumstances: “(a) [t]hree months after the date of sale if the proceeds of the sale are sufficient to satisfy the secured indebtedness with interest and costs of action and of sale[; or]

 

(b) [o]ne year after the date of sale if the proceeds of the sale are not sufficient to satisfy the secured indebtedness with interest and costs of action and of sale.”

[Last updated in December of 2020 by the Wex Definitions Team]