Expert: Michael Brotherton - 2/8/2009

Question
Hi Michael,

Thank you for your help in advance.

I bought a motorhome with a loan in the summer of 2007 that is now the bane of my existence.  At this point I am current on payments, but intended to sell the RV a while ago and can no longer afford this and the insurance and storage.  I am self employed, as I was at the time the loan was granted to me, and I have virtually no business right now due to the economy.

I have tried to sell the RV for a year, lowering the price to even a lot below what I owe and not even any interest.  I have advertised nationally and locally, called dealerships, etc, and at this point, selling it, even for this way low price is not happening.  I owe a bit over 60k on the loan.

I am living off of savings and am now borrowing money from family to avoid tapping into my Roth IRA, which is already down from the market to about 17k.  I have a bit in mutuals, which I must use for fed. taxes and paying back a loan from a parent.

I have a car with 4 months payments left, worth about 13k trade in value now according to kelly blue book.  I have no other debt- all CCs are current with balance paid monthly.

I rent an apartment and own no property and nothing other than the R-IRA, remaining soon to be sold shares, and in 5 months, will own my car.  My official residence is DE and the investments are in PA (with a firm office there, whose base is in Minnesota).

I'd like to negotiate with the creditor for the RV for a settlement.  I want to be a good citizen here and pay them what I can.  I can gather together about 15-20k lump sum to give them at once and if they can auction the RV that would be another 25-30k in this climate.  I don't care if I lose the RV.  

My credit score is very good, and I don't want it ruined by this, but my main concern is that they don't take my car or my Roth IRA.  I don't want to file bankruptcy over this- I don't owe anything else other than my car, which I can pay off today if I had to.  

I also have a joint savings and checking account with my mom, done for management purposes so I could help her, but all of the money in it is technically hers- can be proven with records of depositing her retirement checks.  I want to make sure they don't consider that an asset of mine they can seize.

Also, this is causing me tremendous stress and is affecting my health.  I never should have taken on or been granted this loan in the first place, but it's too late for that now, so I just want out of this in a way that is satisfactory for the bank and not too horrible for me.

I am wondering, is the Roth IRA protected, might they try to take my car... will they see those assets while I try to negotiate with them?  What do they consider specifically? What is the best way to negotiate with them and legally protect myself?  Should I get a lawyer?  Any of this you can shed light on or other advice you have...

Thank you so much :)
Vanessa

Answer
Sorry for thew delay in responding. I have been inundated with questions which I love answering but I still have a business to run.

To answer your questions, first, your IRA is safe. Creditors cannot touch any type of retirement account.

2. Although the car is an asset and potentially a creditor may obtain a judgment and levy property you may be able to exempt the vehicle. Right now you still owe on it and as long as there is a lien recorded they wont pursue the vehicle. You are no a homeowner so they cannot attach real estate and provided they obtain a judgment they may be able to attach bank accounts. You would have plenty of notice before anything like this happens and would be able to avert any problems.

3. As for the negotiation, just make sure you get any type of settlement in writing. Everything is negotiable as long as you can give the creditor some incentive to take a settlement. Never accept an agreement where they require you to pay a deficiency balance or sign a note for the balance.

Negotiating settlements can be tricky. Sometimes the creditor will ask a lot of questions and require certain information which you may or may not want to provide. Never give IRA info. Bank Info such as account and routing number, or other asset information. Give them just basic financial information such as budget and income info so they can see you are in hardship.

You may want to seek legal advice or at least have an attorney to review the final agreement if you don't have a financial advisor. This is what we do so if you need direct help I would be happy to discuss this with you. If you wish to discuss this call me at 937 372 8581. Good luck to you.