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Post Foreclosures: Settle on 2nd Mortgages or Not?

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Hanford



Joined: 06 Jan 2009
Hanford's page
Posts: 1



87 Magic Points

Subject: Post Foreclosures: Settle on 2nd Mortgages or Not?
 
Posted on Tue Jan 06, 2009 7:27 pm  

Four years ago I decided I'd make some extra money investing in Real Estate. I met an investor at a REI Meeting and he said he would be willing to be my partner. He would find houses at huge discounts, we would use my 800 credit and good income to secure loans and he would sell the houses Rent to Own. You can imagine where the story goes from here. It seemed to good to be true and it was. We had terrible tenants, tried to do too much to quickly, and we were hit by the housing market crashing. I spent 40k of my own money trying to keep things going but eventually all of the three houses went into foreclosure. All three homes had 2nd mortgages which didn't get paid off by the foreclosure sales. The first was charged off immediately after the foreclosure. The second two are still open on my credit and will be there until 2012. My question is, I could probably settle both of these loans for around $2000.00. I believe settling will turn them into charge-offs? Will this help my credit enough to make it worth spending the money? My credit is already destroyed so I don't know if it is worth spending the money since I can't use my credit for anything anyways.

On a side note: Living credit free is a surefire way to get your finances in order and keep out of debt. You can't buy anything unless you save first. The only problem is I make good money but can't purchase a home. Lessons learned I guess. Thanks for all your help.
fireyone



Joined: 26 Feb 2008
fireyone's page
Posts: 4246



132 Magic Points

 
Posted on Wed Jan 07, 2009 12:55 am  

I would contact the comapny that has these debts and ask for a PAy For Delete settlement. A pay for delete is when a creditor agrees to remove the debt from your credit report if you are willing to pay off the debt or settle the debt (for a lesser amount than owed). If they do agree for the pay for delete you MUST get it in writing Before paying off the debt. This way if for some reason they do not take it off your report you have the proof to get it removed. A lot of places will agree to PFD but if not in writing will fail to do anything once they have the money in their hands. This is why it is extremely important to get it in writing.
Mary

Mary

Joined: 06 Jul 2006
Mary's page
Posts: 684



17426 Magic Points

 
Posted on Wed Jan 07, 2009 11:25 am  

Yes, foreclosure will destroy your credit score, but this does not mean that you will not pay the difference in the amount that is outstanding and the amount received after foreclosing your property. If you do not repay this amount, the creditor can not only charge off your outstanding debt, but also bring judgment against you to recover the debt. Since your credit is already destroyed, you can choose not to repay the outstanding amount and wait till the creditor sue you to the court. If at all the creditor sue you to the court, then you can come to a settlement plan with the creditor for the outstanding debt amount and pay off the remaining debt.
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carol

carol

Joined: 27 Jun 2006
carol's page
Posts: 1299
Location: Los Angeles, California


30065 Magic Points

 
Posted on Thu Jan 08, 2009 7:36 am  

Hi Hanford
I too think that you need not pay off the debt first as your credit is already destroyed. As Mary said, just wait for the creditor to sue you to the court. If there is a judgment against you to recover the debt, you may file a bankruptcy of Chapter 7 if you cannot afford to pay the judgment amount. And if you are able to pay off the debt at the time the judgment is brought against you, pay it off and get it settled outside the court.
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Carol
fireyone



Joined: 26 Feb 2008
fireyone's page
Posts: 4246



132 Magic Points

 
Posted on Thu Jan 08, 2009 12:18 pm  

Is it true only the courts can decide what chapter of bankruptsy you can file for? I hear if you want to have all your debt forgives a judge must look at your debt and income and decide if you are able to pay off the debt. I know bankruptsy laws have changed these days. Maybe this information can also help our poster.
scott

scott

Joined: 28 Jun 2006
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Posts: 446



10890 Magic Points

 
Posted on Fri Jan 09, 2009 12:12 pm  

Yes, the courts can only decide which bankruptcy you fit into. This is because most debtors try to come under Chapter 7 bankruptcy because in such a bankruptcy, the debtor is discharged of all the outstanding debts. So before you file a bankruptcy, you need take part in a counseling program within 180 days of filing bankruptcy where it will be decided whether you qualify for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
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SCOTT

Use your credit account responsibly and enjoy a debt free life.

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