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I am considering defaulting on a boat loan. This loan is considered…

I am considering defaulting on...
I am considering defaulting on a boat loan. This loan is considered unsecured. Other than repossession, what are the legal and credit repercussions in doing this. I live in the state of New Hampshire. Considering the issues facing the banks right now, does this change my circumstance?
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Customer reply replied 9 years ago

New Hampshire


Already Tried:
I am not in any danger of declaring bankruptcy, but my current financial situation will not allow me to keep paying for this boat.
Answered in 10 hours by:
11/12/2008
VanDLaw
VanDLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 833
Experience: Chapter 7 & 13
Verified

HelloCustomer

 

If the loan is really considered unsecured, and it is not specifically named as collateral it cannot be repossessed. If the boat were collateral, they could repossess the boat, or you could surrender it. If you did this, they would sell the boat and come after you for the difference in what you owed on the note and what they got for the purchase of the boat. This is called a deficiency judgment. If they received a deficiency judgment they can execute on the Judgment and attach wages, bank accounts, lien property, etc. until the judgment is paid in full.

 

You should read over your security agreement or loan papers carefully to see what actions the creditor can take in the event of a default.

VanDLaw
VanDLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 833
Experience: Chapter 7 & 13
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Customer reply replied 9 years ago
<p>Hello, thanks for the good answer. I'll be happy to accept. However, can you address the second part of my question regarding what this will do to my credit.</p><p> </p><p>Thanks.</p>

Certainly.....

 

If they report your personal loan in default, it will lower your credit score, as you probably know. It will be reported just like any other defaulted credit card or loan; if it is "charged off" it will state that the account was written off or charged off. Debt collectors will start calling you, and they could take you to court to obtain a judgment. If they get this judgment, they can attach wages and assets. There is a statute of limitations on how long they can take to obtan a judgment, and in New Hampshire it is 3 years from the date of last activity (usually this is the last payment).

 

The negative reporting will remain on your file for 7 years. After that time it must be deleted from your credit file.

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Customer reply replied 9 years ago
<p>Thanks for the clarification on my initial question.</p><p>A few more questions for you which I will gladly accept your answer...</p><p> </p><p>Can you clarify what you mean by "attach wages and assets"?</p><p>How likely is it that a judgement will be pursued, especially in this environment where home foreclosures are escalating and banks are seeking huge deficiency judgements? The deficiency judgement in my case would likely be $20 to $25K. Basically, the choice I face is to sell this boat at substantial loss (I have been trying to sell this thing for 1.5 years now) then make up the difference by taking funds out of a retirement account (at significant penalty) or roll the dice and simply let this account be written off, accept the fact that my credit takes a blow, and hope they don't come after me. Based on this situation, what might you advise?</p><p> </p><p> </p><p> </p><p> </p>

It would be really hard to say. I do know that because of the current situation they are being more aggressive than they were before because they are losing so much money. It used to be unheard of that a bank would pursue a small judgment because the cost was higher than than the return. Now they are just rolling the dice and hope they can get judgments and seize assets.

 

What I mean by "attach wages and assets" is they will sue you in a court, they may or may not receive a judgment. If they do get a judgment they will follow the laws of your state to collect on that judgment. New Hampshire does allow wage garnishment, and if they find out which bank you use, they will "attach", "freeze", "seize", take the amount that is in there on deposit up and until their judgment is satisfied. If they find out where you work, they will initiate a wage garnishment. If they find you have real property they will place a lien on the property so they get paid first out of any proceeds if and when you sell it.

 

Banks are seeking deficiency judgments, if your boat is NOT collateral then they can't get one of those, but they could get a judgment just on the personal loan default, so it really doesn't make a difference. You could sell the boat for whatever you can get, take the proceeds and put towards the note, at least you would paying it down. Wait and see what they do, they have three years.....it will crunch your credit if they report it, (and they will), and you will be hounded by a collection agency....but if they do not pursue a judgment then the difference is gone. If they do pursue one, you can always find the money then and make it go away. Another words you would be sacrificing a credit hit, but keeping the money..for now. In the end you may end up having to pay the amount just to keep a judgment off your credit report. You would want to do this, a "public record" hit, is worse then a loan default.

VanDLaw
VanDLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 833
Experience: Chapter 7 & 13
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Customer reply replied 9 years ago
Thank you for the thoughtful answer. One final question. Would my wife's credit be impacted in any way by my loan default. She was not a signer on the original loan. Thanks.
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