Question: Home equity loan in collections. house already foreclosed.?

(Posted by: Shawn C on 2010-01-11 08:18:00)

I foreclosed on my home 2 years ago. The primary loan deficiency was forgiven and I got the appropriate tax forms to show that. All set there. I also had a 66K home equity loan with another bank and I just got notice from a collections agency they are trying to collect. I know the bank charged off the account. I have no way to pay that amount, what are my options? I know at the time we were trying to short sale the home, the equity holder agreed to $1000 to release the deed. Thanks for your help

Posted by: MMM on 2010-01-11, 08:31:24

Secondary loans are not automatically forgiven and may remain in place without the collateral unless you specifically got legal paperwork at the time of foreclosure discharging both loans against the house. The paperwork must state that the loan is either forgiven in full or settled for less than the full amount. It must be reported to the credit agencies with that exact wording. Anything less, and you probably still have a lien. Unfortunately, it is very very likely you are going to need an attorney to solve this one. Just because the bank charged off the equity loan, doesn't mean they didn't sell the bad debt to a collections agency for 25 cents on the dollar. The collections agency will hound you to the grave to try to recover the money. If you want to salvage your credit, get on this immediately!

Posted by: David Z on 2010-01-11, 08:43:18

Unfortunately your home equity lender can try to collect. their short sale offer is not meaninful. the only way to stop them from calling is to reach a settlement with them or file for bankruptcy protection.

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