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Richard, Attorney
Category: Legal
Satisfied Customers: 55604
Experience:  Attorney with 29 years of experience.
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I have a friend who is in his 80s. He and his wife had financed

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I have a friend who is in his 80s. He and his wife had financed a new motorhome several years ago but she has passed away and he is at the point where he cannot drive the motorhome safely anymore. He called the finance company and they told him he could surrender the MH and it would go to auction and he would be liable for the difference. The value is much less than what he owes so he would have a problem trying to sell it to a private party. My question is: Is he liable for the difference if he lets it go back?
Thanks, XXXXX XXXXX California
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good afternoon. A motorhome is treated as a motor vehicle and thus do not fall within CA's non-deficiency judgment. As a result, the lender does have the right to pursue your friend for the shortfall. But, whether or not they will depends upon their assessment of the collectibility of a deficiency judgment. So, if he can convince them there is nothing for them to get, and that if they were to pursue a judgment, he would simply file for bankruptcy protection and get the judgment discharged—and even if he has no intention of doing so, it is still good leverage with the bank because they do not know whether or not he would… then it is unlikely the lender will spend the time and money necessary to get a judgment they believe is uncollectible in the end.

This is the part of my job I don't like...when the law is not in favor of my customer. I wish I could say your friend would not be liable for the shortfall, but, I can only provide you information based on the law so that you can act on the best available information to you. ………..I wish I had better news, but can only hope you recognize and understand my predicament and don't shoot the messenger. I'm sorry!

Thank you so much for allowing me to help you with your questions. I have done my best to provide information which will be helpful to you. If I have not fully addressed your questions or if you have any follow up questions, or if I have misinterpreted your questions in any way, please do not rate me yet, but simply ask a follow up question without rating so I can provide you with a fully satisfactory answer. If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service with 3, 4, or 5 faces/stars so I can receive credit for helping you today. I thank you in advance for taking the time to provide me a positive rating!

Customer: replied 4 years ago.

Thanks for the truth, unfortunately my friend does receive a very good pension and has some assets so maybe trying to convince them that he does not have anything to get, will not work. It might be better for him to sell it at a lose and pay the difference instead of going to auction.

You're welcome and thanks for following up. A voluntarily sale is always going to result in a higher price than an auction. But, with regard to any deficiency pursuit, he needs to be aware that his pension is likely to be entirely exempt. Also, CA has a pretty generous homestead exemption so his home has protection to some level. With regard to other assets, he might want to consider putting his non-exempt assets (retirement income and retirement account assets are likely exempt and can be left in place) into a family limited partnership. Carefully drafted, this converts assets that a creditor would find attractive to go after into a limited partnership interest with no control, no rights other than that of an assignment, no transferability, no marketability, and no right to distributions. The transfer is for fair market value…i.e., you are simply exchanging one asset for another of equal value to you. And, you maintain control through a general partnership interest that you control. Yet, when complete it essentially is an asset no one wants and thus the creditor is less likely to pursue the debtor. Family limited partnerships must be carefully drafted and one would need an attorney experience in this area to do so, but they can be a very effective method of asset protection.
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