Expert: Regan Shinski - 1/10/2010

Question
I bought an RV in April 2008 for $95K  Now 21 months later due to the recession this RV has lost over 50% of its value. It is worth between $40K to $50K at the current time. I have tried to sell this motorhome since Aug 2009 and have not had one offer. I am self employeed and my business has had an extreme slow down during the current recession and my income has decreased to the point I can no longer afford the RV. The bank sent repo guys out to pick up the motorhome when my account was 53 days past due.  I was happy to turn the motohome over to them.  My question is now what should I do? Should I hire an attorney.  I can keep all my other debt current but I think letting this RV go back is in my best interest.  If I keep all other debt current how bad will this repo effect my credit. Other personal debt includes mortgage, autos,credit cards,HELOC, and medical . Please advise.

Answer
Dear Mike:

I'm sorry to say it's going to crush your credit but it's already likely taken a big hit with a current loan reporting late.

The bigger concern is if they pursue it - and I think they would with the amount owed.  They will re-sell the RV in a "commercially reasonable manner", usually at public auction.  The amount they get will be taken from the loan balance and the costs of the repo added to the balance.  This gives you a shortfall amount - the amount the bank is out.  This then becomes an unsecured debt, much like a credit card.

They will either drop it, pursue it directly, or turn it over to a collection agency.  If they turn it to a collection agency, a separate derogatory account will appear on your credit from the collection agency.  

As stated, the original creditor or the collection agency may sue you for the debt.  If they do, it is likely a court judgement will be entered against you.  This then becomes and ADDITIONAL derogatory item on your credit.  More importantly, the judgement may give the creditor the right to garnish wages, place liens on real estate, attack bank accounts, or even have the sheriff take personal property for sale at auction to pay the judgement.  Now there are exemptions to these collection techniques and not all states allow all of them, but they are possible and more likely because of the large amount.

You will need to stay vigilant.  Don't just throw away notices.  Validate any debt letters you receive from collection agencies.  Try to avoid the judgment getting in place at all cost.  Bankruptcy may become an option down the line but would not be recommended right now.  Bankruptcy would REALLY destroy the credit for up to ten years but may become an option in the face of an aggressive creditor.

I'm sorry to be so doom and gloom.  There is a chance that nothing other than collection accounts will be reported and you won't be aggressively pursued, but I am worried because of the amount.  

Good luck.  I wish I had better options for you.

Regan
mbscompany@aim.com