Considering taking a loan from friend on titles

[marmaduke]

I am considering borrowing money from a close friend and giving him liens on my vehicles to use the money to delay drawing out any more ira moneys for living expenses.
I have one ira investment that will mature in 2016. If I don’t touch it until then I will realize about 6K a year growth. My friend is willing to take low interest and no principal until after the maturity date.

My only income is Social Security and I have a mountain of debt but I probably won’t be able to file BK until the middle of next year. By then I will almost certainly have judgements against me. Loan money would be used for reasonable living expenses. Would this fit into the category of legitimate pre-planning with regards to BK?

If I go ahead with this plan I need to make sure that I protect my friend’s interest with a contract that is solid. Can I find a free contract form on the internet or do I have to pay an attorney to assure an airtight agreement? Any help would be greatly appreciated.

one of the titles was just released to me and it is in the process of being sent to me (6 to 8 weeks). Is there a way to put him on as a lien holder without the physical title?

[Pjmax]

Hope an expert will clarify, but it seems to me whatever steps you take to protect your friend's interest won't amount to much, if you file for BK. Will you be filing chapter 7 or 13?

[marmaduke]

Hope an expert will clarify, but it seems to me whatever steps you take to protect your friend's interest won't amount to much, if you file for BK. Will you be filing chapter 7 or 13?

Sorry, I don't follow you on this. could you explain?

[Pjmax]

Marmaduke, sorry, I'm not an expert, I'm sure they will be along here soon. I just read some of your other posts, and your situation is way beyond my knowledge level. We all try to learn from each other here, so that is why I asked my question above. All your debt will be listed in your BK documents, your debt to your friend included. Also, if you are expecting judgements, what are you planning to do with the money your friend would loan you? Your SS income is protected from collection, but if any other funds go into your bank account, your money is vulnerable.

Have you talked to any attorney's yet? You are doing the right thing by preplanning your BK and reading as much as you can before you file. However, I think you may need to read up on bankruptcy a little more, and maybe set up a few attorney appointments. Most BK lawyers offer free initial consultations, and will be able to help you avoid some mistakes.

[marmaduke]

Pjmax, thanks for the reply. I have been reading all that I can and I do intend to make those appointments. my expenses include non-dischargeable payments so my reasonable cost of living is high right now. The loan money would go to satisfying these payments for a while until I can file then I will have to make these payments from my IRA's.

[LadyInTheRed]

Securing a loan with a lien on the car would protect your friend if there is sufficient equity in the car and you make sure the lien is perfected. But, don't bother.

If you are going to file BK, stop digging a hole. Quit paying your unsecured creditors and use the money to live. Creditors can't get at your social security money and will take a while to sue. You can easily get to the middle of next year without a creditor getting a judgment. Even if a creditor does get a judgment, it's not the end of the world and the debt will still be discharged in BK. Make sure to keep your SS payment separate from your other money. Ideally, use an SS debit card instead of depositing it in an account that a creditor can freeze and force you to prove it contains SS funds.

Continuing to pay your unsecured creditors when you know you will file BK is a waste of money. Don't take anything more from your IRA or take secured loans.

ETA: Just re-read your post and say that you have non-dischargeable debt. What kind of debt is it? Can something be worked out directly with the creditor? Would stopping payment of unsecured debt help?

[Drazil65]

Hi, agree with Lady in Red, stop paying unsecured debt and make your plan to file in say 6 months or so, not a long time away. Stop the madness and robbing Peter to pay Paul game, its so not worth it if you are going to file anyway. Do not worry about touching your IRA an do not go further into debt, get the preplanning train outof the gate and one of the first stops is stop paying debt.

Good luck!

[marmaduke]

Hi LadyInTheRed,

Thank you for your thoughtful reply. I have read many of your posts and respect your opinion.

Securing a loan with a lien on the car would protect your friend if there is sufficient equity in the car and you make sure the lien is perfected. But, don't bother.

I really need the money for food and basic living expenses. see below about why. I would also like to have leins on my stuff to discourage a creditor from filing one.

If you are going to file BK, stop digging a hole. Quit paying your unsecured creditors and use the money to live. Creditors can't get at your social security money and will take a while to sue. You can easily get to the middle of next year without a creditor getting a judgment. Even if a creditor does get a judgment, it's not the end of the world and the debt will still be discharged in BK.

I am already behind around up to 95 days on my credit card payments although I was talked into continuing to make payments of less than minimums on all of them. It could be construed that I ran up charges before I ran out of money including some large charges that I wish I could undo.

Make sure to keep your SS payment separate from your other money. Ideally, use an SS debit card instead of depositing it in an account that a creditor can freeze and force you to prove it contains SS funds. Continuing to pay your unsecured creditors when you know you will file BK is a waste of money. Don't take anything more from your IRA or take secured loans.

ETA: Just re-read your post and say that you have non-dischargeable debt. What kind of debt is it? Can something be worked out directly with the creditor? Would stopping payment of unsecured debt help?

I probably mis-spoke when I wrote non-dischargeable debt. I am actually current and it is a support payment that takes all but $50 a month of my SS. So you can see that I must use IRA money to live. (Not to bore you with the details, but the support payment was not warranted but was agreed to as a way to save my business during better financial times)

This is why I asked the question about borrowing money from a close friend to minimize my IRA draws so that I could leave one IRA untouched until it matures in the middle of 2016. You used the word "perfected" above and I am wondering if I can do that without an attorney and the related expense of drawing up a contract?

Thanks again for your help.

marmaduke

Hi, agree with Lady in Red, stop paying unsecured debt and make your plan to file in say 6 months or so, not a long time away. Stop the madness and robbing Peter to pay Paul game, its so not worth it if you are going to file anyway. Do not worry about touching your IRA an do not go further into debt, get the preplanning train outof the gate and one of the first stops is stop paying debt.

Good luck!

Thanks Drazil65

[btbeme]

Obtaining loans that are secured against an asset, then using that money to purchase allowable good and services is absolutely OK, so long as it is done right.

First, as LIR said (and you asked about) you want to make sure that the lien is "perfected." What that generally means is that the lien is recorded on the title of the vehicle and that you have made agreed-upon payments on that loan according to the loan contract you have drawn up with your friend. To record the lien, you should take your existing title, your loan agreement (signed and probably notarized) and any lien recording paperwork (if needed by your state) to the DMV and ensure the new title shows the lien.

Second, track every cent of that loan money. Copy the check you get from your friend (not cash) and the deposit into your checking account. Keep receipts of purchases. Make a paper trail - pay using debit rather than withdrawing cash whenever possible or reasonable. Keep copies of the new title, loan document, etc. handy as the Trustee will likely want them.

As for your credit purchases... don't worry too much about them. Paying anything is a fool's errand. If you are more than 6 months from those worrisome charges you will likely be OK.

[rjsdsu]

I have a form you can use. PM me and I will send. My buddy and I did title loans through his business to pay some medical bills. It also resulted in a great pre-chapter 7 planning strategy as you get a larger means test deduction for cars with a lien versus cars free and clear. I went through a DMV service to perfect the liens on behalf of my lender though you could do it yourself. When I first brought up this topic a few months back on this forum, I got a lot of responses that I should go through a neutral 3rd party rather than a close associate but after pursuing that route, I found the title loan companies were insane--8% interest per month, that is over 100% interest per year!

[marmaduke]

Obtaining loans that are secured against an asset, then using that money to purchase allowable good and services is absolutely OK, so long as it is done right.

First, as LIR said (and you asked about) you want to make sure that the lien is "perfected." What that generally means is that the lien is recorded on the title of the vehicle and that you have made agreed-upon payments on that loan according to the loan contract you have drawn up with your friend. To record the lien, you should take your existing title, your loan agreement (signed and probably notarized) and any lien recording paperwork (if needed by your state) to the DMV and ensure the new title shows the lien.

Second, track every cent of that loan money. Copy the check you get from your friend (not cash) and the deposit into your checking account. Keep receipts of purchases. Make a paper trail - pay using debit rather than withdrawing cash whenever possible or reasonable. Keep copies of the new title, loan document, etc. handy as the Trustee will likely want them.

As for your credit purchases... don't worry too much about them. Paying anything is a fool's errand. If you are more than 6 months from those worrisome charges you will likely be OK.

Thanks btbeme,

I appreciate the advice. I will heed it!

marmaduke

[marmaduke]

I have a form you can use. PM me and I will send. My buddy and I did title loans through his business to pay some medical bills. It also resulted in a great pre-chapter 7 planning strategy as you get a larger means test deduction for cars with a lien versus cars free and clear. I went through a DMV service to perfect the liens on behalf of my lender though you could do it yourself. When I first brought up this topic a few months back on this forum, I got a lot of responses that I should go through a neutral 3rd party rather than a close associate but after pursuing that route, I found the title loan companies were insane--8% interest per month, that is over 100% interest per year!

Thanks.

For the life of me I can't figure out how to send a PM on here? I am logged in but it says I don't have permission. Any ideas anyone?

[pamkev]

You might not have enough post yet to PM someone

[chrisdfw]

It sound like you have an income problem, I would look into ways to increase it, regardless of any plans to take a secured loan.

[marmaduke]

It sound like you have an income problem, I would look into ways to increase it, regardless of any plans to take a secured loan.

Thanks for tbe advice. Dont think I havent tried that! Even though I have great skillsets, it seems no one wants to hire a 63 year old disabled person.