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Am I About to be Sued?


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by exfatguy   $0.10 total tips   💰tip   follow   2011 Aug 22, 8:14am  

Long story short: Short sale in '08. First paid off, second got about $100K out of $200K. My ignorant behind didn't specifically get forgiveness of deficiency.

In the subsequent years, I've been contacted by about five collection agencies. I sent debt validation letters to each one, and never received anything. Each stopped contact after the letters.

Flash to last week, where I received a collections letter from a law firm. It was a general collections letter, but the law firm that sent it does represent the bank and that law firm has sued people on behalf of that bank. I sent a debt validation letter to them, too.

Statute of limitations runs out early next year.

How f'd am I right about now? I have no assets, though I do have a job. However, the deficiency is so high that I'd pretty much have no choice but to file Chapter 13 after any judgment.

Do you think they'll sue me? Would they factor in that I'd probably declare bankruptcy anyway even after a trial and judgment. Would it be worth it to them?

Any thoughts about what might happen next?

Comments 1 - 11 of 11   

1   jworm   2011 Aug 22, 8:57am  

What state was the house in?

2   Dan8267   2011 Aug 22, 8:59am  

You should definitely talk to a lawyer. I'm not sure how second liens work, but for first liens it depends on whether you are in a recourse or non-recourse state. Google "is XXX a recourse state" replacing XXX with the name of your state.

In a recourse state you are generally responsible for all deficiencies on short sales. In non-recourse states the lender is restricted to just getting the collateral.

3   atst1138   2011 Aug 22, 9:18am  

Dan8267, I'm not sure that is correct. I believe all recourse/non-recourse statutes deal with foreclosure not short sale which is deemed an actual sale. In non recourse states lawyers may suggest not accepting a short sale unless you specifically get a statement that this deal satisfies the debt otherwise you lose the anti-deficiency protection of the statute (which may vary by state). 2008 is ages ok in the history of this mess. Can I ask the original poster if he/she has tried to qualify for another mortgage yet? Supposedly they should qualify by now.

I expect many will be sued once this mess starts to really clear, if the SOL are still valid by state.

4   Dan8267   2011 Aug 22, 1:05pm  

You might be right. I know the recourse/non-recourse issue does deal with non-bankruptcy foreclosures including strategic defaults. Short sales might depend on whatever agreement you have with your banks, assuming you have one. If you short-sell without a written agreement from your bank, I would suspect that the recourse/non-recourse status of you state would matter, assuming that such a sale would be legal.

However, since the loan in question is a second lien, it might be the buyer who gets stuck. Also, liens can expire if they are not acted upon. More reason to ask a lawyer.

5   exfatguy   2011 Aug 23, 3:48am  

Thanks, everyone.

House is in CA. I'd love for SB458 to be retroactive, but it doesn't appear to be.

The second loan was not purchase money.

6   corntrollio   2011 Aug 23, 6:57am  

fatguy says

The second loan was not purchase money.

If the second is not purchase money, it would generally be recourse in CA. I wonder if this is a last ditch effort to get some payment out of you before the statute runs. It would be fair to assume that they've pulled some of the available info about you (listed assets, credit report, etc.). They could be bluffing or they could be trying to get you to settle for some amount. One thing you could ask them is who owns the debt now.

Good luck!

7   exfatguy   2011 Aug 23, 10:35am  

I have no listed assets, and very few unlisted. I have a job, which they could possibly try to garnish, but I'd do a Chapter 13 if that happened.

I also have non-trivial CC debt. And I believe that my BK attorney fees in my Chapter 13 would be priority, so the amount they'd actually get from me wouldn't be that great.

Logic tells me they wouldn't sue based on this, but logic may have nothing to do with it. These are banks, after-all. If they were logical they never would have given me the loan in the first place.

8   corntrollio   2011 Aug 23, 11:21am  

fatguy says

I have a job, which they could possibly try to garnish, but I'd do a Chapter 13 if that happened.

What makes you think your job wouldn't be garnished in Chapter 13? If you make enough money, a BK judge could certainly say you have to pay part of the deficiency judgment going forward.

9   atst1138   2011 Aug 23, 11:36am  

Sort of a side question here but can creditors really pull up information on your 401k, IRA, and brokerage account holdings to see if you are worth suing? How do they actually do this?

10   lurking   2011 Aug 23, 11:43am  

atst1138 says

Sort of a side question here but can creditors really pull up information on your 401k, IRA, and brokerage account holdings to see if you are worth suing? How do they actually do this?

Yes, they can find out all of your financials through your SS number when they look for assests when they get a judgement, but it doesn't matter in the case of bankruptcy because retirement accounts, SS and disability payments are judgement proof.

11   corntrollio   2011 Aug 23, 11:46am  

atst1138 says

Sort of a side question here but can creditors really pull up information on your 401k, IRA, and brokerage account holdings to see if you are worth suing?

I'm not quite sure who suggested that you could, but some of this info would require a subpoena or some sort of court order/process (e.g. a debtor's exam, for example).

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