NFCU delinquency notice

[Colorfulstom]

I just received a delinquency notice from NFCU stating that I was late on my mortgage payments and was 2098 days delinquent and owed $19,000 due upon receipt. This loan was a second mortgage loan that was discharged in by Chapter 7 in June of 2010. What is the best way to handle this?

[justbroke]

Colorfulstom I would need more information. Technically, a Chapter 7 discharge can only discharge you legal obligation to pay any debt for which you have not reaffirmed. This means that if you did not file a reaffirmation agreement, the debt was discharged. The part that most people miss is that while the debt, itself, is discharged, the underlying lien on your property (known as the security instrument or mortgage or deed of trust), is not discharged or void.

Repeat after mean... all liens pass through bankruptcy unaffected. This is the law of the land. While Navy Federal Credit Union (NFCU) can pursue your home itself, known as an in rem action, they cannot pursue you personally for the debt. I would say that letter is an action to collect from you personally. I would send NFCU a copy of the discharge a strong warning that they are in violation of the permanent discharge injunction and any further attempts to collect the debt in personam, will be met with a complaint for violation of the permanent discharge injunction.

The problem is that the lien can be pursued through foreclosure (or a Trustee sale if it's a Deed of Trust and/or your State handles foreclosures as non-judicial).

Your best way to handle this is to first, contact your attorney and see if they want to deal with this violation. Also ask your attorney about whether you should also make an offer to purchase the lien (see threads about settling on second liens after discharge). Settling is an art form which should not be left for people who don't know how to negotiate. Since it has been five years since your discharge, it could be more difficult to obtain a settlement in the 5%-10% range. You would need to look at the home's value and if there is any equity, above the first and second, you'll be hard pressed to obtain a settlement for less than 100%.

If you did not use an attorney, you'll have to pursue everything I listed... starting with the letter (sent return receipt requested) demanding them to stop trying to collect in personam.

[Colorfulstom]

The home was surrendered in the bankruptcy and subsequently foreclosed. It was auctioned by the lender and has a new owner. This all happened shortly after the bankruptcy. I guess I am kind of shocked that this has happened as all my credit reports since the bankruptcy shows this as being discharged through bankruptcy. I am going to pull my credit report to see if this has changed.

[justbroke]

Colorfulstom that makes this even more strange. However, NFCU cannot demand or even ask you to pay this discharged debt. Since the property is foreclosed, then follow the instructions only in my second paragraph. Demand that NFCU stop attempting to collect the debt. I would include a copy of the discharge order with the letter (and sent it certified mail return receipt requested).