Handling loan default when lending from Self Directed Roth IRA

[Steve K.]

Scenario:-I lend private money sitting in my checkbook control Roth IRA LLC to a 3rd Party LLC to buy a Real Estate. The Mortgage was recorded in the first lien position. Mortgage had a confession of judgement clause. Now, the borrower LLC defaults on the loan.

My Roth IRA yearly contribution of 6000-7000 has already been reached. Roth IRA LLC does not have enough money in bank to even send notice to the borrower or even pay the attorney fee to pursue foreclosure proceeding/sheriff's sale.

Here are my Questions:-

1. Since I cannot use my personal money to hire the lawyer, how do I pay the fees? (I understand some lawyer may extend credit terms, what If that is not an option)

2. Filing fee with Sheriff's or courts will also be due before notice of default/lis pendens can be recorded. How do I pay that?

3. What I understand, money from any source need to go to Roth IRA First, then move to Roth IRA owners account to Roth IRA LLC before it can be used.

• Would IRA custodian allow additional contribution to Roth IRA even if yearly contribution have been reached?

• Are their other ways to fund the Roth IRA to bear the cost before it's eventually recouped from the borrower?

• If there are ways to excess contribute the Roth IRA, are any Tax ramification to contribute excess funds? (i.e. IRA levied taxes)

• I read somewhere that IRS levies some excise taxes on excess contribution every year on the excess funds in the IRA. Let's assume the ROTH IRA account is just 1 year old and I got the possession of the property thru foreclosure. How do I remove fund from my ROTH IRA to save myself from paying excess contribution taxes?

I know these questions may be tough. I'm sure somebody on BP definitely has suggestions and answers. I appreciate your inputs.