HELOC persued by Collection Agency?

[bkinpa]

I had a chap 13 bankruptcy voluntarily withdrawn (I voluntarily withdrew it after only a few months) in Pennsylvania a year ago. Just prior to that I had a verbal discussion with my Home Equity bank (an interest only 2nd mortgage loan) where they told me that the loan was charged off and any payments made would go toward the principal. Once my bk was withdrawn I waited for a statement from the bank for the home equity loan. I never receieved one nor did I receive any communication from them. I did not send any payments and was never contacted by them.

Last week out of the blue I received a letter from a collection agency (not the bank) for this loan offering a 60% settlement payment!

That is the last thing I expected. By the way their loan is underwater if they tried to foreclose. There is still a mortgage lein against my property for the loan amount.

What do you make of this situation? Is this an opportunity? Are they taking this route thinking they will get more than forcing a foreclosure?

I am wondering if the Collection Agency purchased this debt. But I doubt it.

Thank You in advance.

[HHM]

I sure hope that is not the reason you withdrew your 13, based on the statements of the bank.

This is now common for second mortgage.

First, let's back up and understand what "Charge-off" means. ALL IT MEANS is that the lender has decided to "account" for the loan as a loss and clear their books. A charge off, IN NO WAY effects the various legal obligations associated with the loan. Since you did not receive a discharge, the 2nd mortgage is fully enforceable. That means, they can foreclose (if they wanted, but they wont in this market), or pursue you personally for the debt (i.e. sue you and garnish your wages).

This is an opportunity for you to settle, but you need to make sure that any letter you get them from promises at least 2 things. (1) that payment of "x" amount is a full accord and satisfaction of the debt, and (2) that within 30 days of receipt of payment, they will remove the lien from the county recorders office.