Legal Question in Credit and Debt Law in California

Re: Repercussion of allowing motor home to be reposessed

If you allow your motorhome to be repossessed,not only will you have potential creditor claims if you owe a portion of the depreciated value on the motorhome,you could be subjected to tax under the discharge of indebtedness rules.If you are under an agreement to pay a certain amount of money and you later breach the agreement without a new agreement, in the eyes of the IRS you have received the equivalent of ab asset.

Re: Repercussion of allowing motor home to be reposessed

If you purchased the motor home with this loan, it is characterized as a "purchase money obligation." Such are not subject to deficiency judgments against the borrower. If, however, you simply made the loan after you bought the motor home, it is a general obligation and you owe the money if there is a deficiency after sale of the security (your motor home).

Re: Repercussion of allowing motor home to be reposessed

Yes, you will owe a deficiency. It is irrelevant whether it was purchase money--under California law, motorhomes are considered vehicles--and there is no deficiency protection--unless you can prove it was your primary residence in which case you have an interesting case--research would have to be done, but I seriously doubt you have any legal protection against a deficiency. Don't worry about discharge of indebtedness taxes as you will have to enter into a setlement agreement with the finance company--which will say the value of the indebtedness is equal to the value of the vehicle you are returning to them. Your most realistic option is probably bankruptcy. The finance company will prbobably not settle with you for just the return of the vehicle and will sue you. Bad news, I know.