Collector Trying to Collect Deficiency After Foreclosure

by Brian

I left a condo in 2006 to go to foreclosure and moved abroad. The sheriff sale was in August 2007. I returned to the USA in May of 2010 and received 2 letters over the summer from a debt collector regarding their attempt to collect on my home equity loan. In December 2010, they attempted to contact me via telephone and even mentioned to my wife , who was also on the loan that the amount they are seeking was reduced from the original $24,000 to $17,000. Not sure what to do as we really do not have the money to repay this and assumed when we left , that the foreclosure would pay off the loans but as we now know this wasn't true for the 2nd loan.

Looking for advice what we should do.

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Feb 02, 2011
Collector Trying to Collect Deficiency After Forclosure

Thanks for getting in touch.

The collector is demanding that you pay the deficiency on your loan -- the difference between what you owed on it when your home was foreclosed on and the amount that the bank was able to get for your home when it was sold. If you do not pay the amount of the deficiency, the collector or the bank, depending on who now owns the debt, may decide to sue you for the money. If it wins the lawsuit, it will ask the court for permission to do one or more of the following: seize funds in your bank account, garnish your wages, put a lien one or more of any nonexempt assets you may own, or seize one or more of your nonexempt assets. (Nonexempt assets are assets that creditors can take; exempt assets are protected from creditors. Each state determines which assets are exempt or nonexempt.)

Whether or not you get sued will depend on the collector's (or bank's) assessment of how likely it is that it will be able to collect the deficiency judgment if it wins the lawsuit. If you and your wife are both unemployed, if you have very little money in your bank accounts, and if you own few if any nonexempt assets, you may not be sued. However, the collector (or bank) may decide to go ahead with the lawsuit anyway, gambling that your financial situation will improve soon at which point it might be able to collect on its judgment.

I recommend that you schedule a meeting with a consumer law attorney in your area who helps consumers resolve debt collection problems. The attorney will want to review all of the paperwork associated with the foreclosure of your home and all communications you may have received from the debt collector related to the loan deficiency in order to ensure that everything was done properly. If it was not, that will work to your benefit. Also, the attorney will take a look at your current financial situation and advise you about your best course of action. One option may be to file for consumer bankruptcy.

By the way, most consumer law attorneys will not charge for an initial appointment, but you should confirm that is the case when you call to schedule a meeting.

Let us know how you resolve your situation. Your feedback will be useful to others with your same problem.

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