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Do I need to pay for second loan even after charge off?

I was recently in foreclosure (twice) and during the first round, I received a 1099 (Cancellation of Debt) for my [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url]. I was just recently hit with back taxes for not reporting this. My mistake. However, in looking to [url=http://www.mortgagefit.com/refinance.html]refinance[/url] my home, my lender that charged this off now says that I need to pay this in order to get a clear title. So, am I responsible for both the loan and the taxes?

HELP!

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

You must understand that a second mortgage charge off is not a forgiveness of the debt. It is only an accounting entry.

Douglas

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Welcome to MortgageFit Forums.

I am afraid to say that you need to pay them in order to get a clear title and enable you to refinance.

Now, a charge off means that the lender thinks the debt can't be collected from you and he writes off the loan from his account and absorbs the outstanding balance as a loss.

But it will not affect whether you still owe the money. You are not freed from the debt with a charge off. In a charge off the lender passes the loan to a collection agency to recover the debt.

This has a serious effect on your credit report and stays on your report up to seven years. So, if it is possible for you to pay it off then negotiate with the lender to make out a deal where you can pay the debt and the lender changes the status of the account to "Paid as Agreed". Try to get in writing if you attempt to do this.

God bless you.

For MortgageFit,
Samantha

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blue's picture
blue | Joined: October 21, 2005 09:17 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

As your charge offs are recent, it's better to pay it off. If it was 2 years older or more then, you would not have to repay the debts as you could have been able to manage a mortgage with the sub-prime lenders under that condition.

But in case of a conventional loan, you will be still required to pay it off even after 2 years.

Blue

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Buck's picture
Buck | Joined: May 22, 2006 03:33 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

OK, if I pay this off, am I still required to pay the 1099 (Cancellation of Debt) taxes also? What happens if I pay off the debt. Are they required to reverse the 1099? I believe the charge off occurred around mid-year 2004, I know the 1099 I received was for 2004. My first is a conventional fixed rate loan and the 2nd was a 15 year with balloon payment at the end. I'm just trying to better understand my options. Thanks for your help.

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

In cases of foreclosure, generally, a person loses his home and he also has to pay a tax bill. Since you have received a 1099-C form, it implies that your property has been sold off for an amount lesser than the loan amount. But you may not have to pay the taxes if you are insolvent.

Usually a debtor is considered to be insolvent when his liabilities exceed the fair market value of all his assets. So, whether you will have to pay the entire back taxes or a part of it depends on your liabilities. And, even if you pay off the debt, the 1099 will not be reversed.

I would suggest that you consult a tax professional for further clarification. He will help you to determine how much of the 1099-C is taxable. Be quick or else, the IRS may file Federal Tax lien and then take further action against you.

Thanks,

Caron.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello all, Due to unemployment our 2nd mtg is now 8 months behind. Our lender is willing to let us do a Short refinance. If we can't get approved for a half way decent program then we will have to do a short sale. Our liabilities well exceeded the fair market value of our home. My main question is....How does the charge off effect title. Will the 2nd mtg still show? The current lenders we are working with know are situation and seem to think we can still refi and at least pay the 1st off. Any extra of course will go towards 2nd. Is this possible? Should we receive a 1099-c for the 2nd even if we do end up reinstating and continue to pay the 2nd down? We have been approved so far for a 2/28 or 3/27. This would help us definately re establish a clean pay history again and hopefully refi before the rate starts to adjust. Do you think this would benefit us? Any info and advise would be GREATLY APPRECIATED!!!!! Thanks....Our state of residence is Indiana, in cause you need that info....also only 1 mortgage is reporting and no charge off,as of yet is showing on our credit bureau. THANKS!!!!

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Also from previous posting...Both mtg's are with the same lender...

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I Think your lender is right you can opt for refinancing and pay off atleast your 1st mortgage.

Zeal_Deal

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Welcome to the forums.

[quote:452f959a6e]How does the charge off effect title. Will the 2nd mtg still show?[/quote:452f959a6e]
Your debt will be considered as "charge off" if the lender does not collect the payments from you anymore. Usually, charge off affects the title as repayment of any debt against your property is necessary to ensure clear title.

The second mortgage will show up on your credit report only if you are unable to pay it off and the lender regards your debt to be uncollectible (that is, charge off).

[quote:452f959a6e]Any extra of course will go towards 2nd. Is this possible?[/quote:452f959a6e]
I think refinancing will be a good option. At least if you can refinance before the rates start to adjust, you will benefit from this process. But see that you can get a rate lower than the one at which you pay the current lender. Refinance will help you pay off the first and anything extra can surely be used to repay the second mortgage.

Thanks,

Caron.

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Jessica's picture
Jessica | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

[quote:e0c112ec13]Should we receive a 1099-c for the 2nd even if we do end up reinstating and continue to pay the 2nd down?[/quote:e0c112ec13]
Your creditor will not offer you a 1099-C form as your debt is not cancelled; rather you will still be paying for the second mortgage.

[quote:e0c112ec13]Do you think this would benefit us?[/quote:e0c112ec13]
If you can look out for rates lower than that of your current mortgage rate, then you are likely to benefit from a refinance. Also, if it can re-establish your credit history, then it is surely a good option.

[quote:e0c112ec13]Only 1 mortgage is reporting and no charge off,as of yet is showing on our credit bureau[/quote:e0c112ec13]
Since no charge off is being shown on your credit report till now, so if you can pay off the debts, your credit profile won't be affected negatively.

Regards,

Jessica.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We recently had a forclosure, which we also had a 2nd mortgage. When we were in preforclosure both mortgage companys approved a short sale because what we owed was now more than what the home was worth because of the declining market in our area. We received a contract on our home and for 2 months no word from anyone. Our agent called them every 3 days but 2 days before the auction date, they decided to refuse the offer. Our agent could see no other alternatives because both mortgage companys were fighting over the fact that the 2nd mortgage needed more money than the first was offering. I need to know if we are obligated to pay the taxes and I believe we are still bound to pay the 2nd still. We are still unable to pay anything towards the 2nd and they now are saying they will garnish our wages. We have already filed bancruptcy in 2001 so we dont have that option yet. I originally lost my job and the job I now have did not cover our payments anymore. Do you have any suggestions for us.

Thank you for your time.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:dfa31de04d] We are still unable to pay anything towards the 2nd and they now are saying they will garnish our wages.[/quote:dfa31de04d]

Which state are you in? I am asking as in some states after getting a deficiency judgment the lender cannot garnish wages for recovery of his dues.

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Ya, if the second mortgage isn't paid off, the lender can proceed to garnish wages. But I could not get as to what taxes you are talking about? The property taxes or the taxes one pays due to debt cancellation But none of the lender has cancelled the debt through charge-off isn't it? oh and one more thing, garnishment can happen but it will depend on whether you state allows it.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

YOU PEOPLE ARE ALL..YES ALL WRONG!!!!!!!!!
WHEN A LENDER CHARGES OFF THE 2nd LIEN...THEY WILL 1099 YOU FOR THE DEFICIENCY AND YOU WILL NOT..YES I SAID NOT HAVE TO REPAY THE DEBT..YES YOU DON"T HAVE TO REPAY THE DEBT...YOU WILL HAVE A CLOUD ON TITLE WHICH MEANS NOTHING IF YOU AREN"T MOVING.

GET A CLUE PEOPLE..>YOUR DISINFORMATION CONFUSES EVERYONE IN THE FORUM

MIKE

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Mike,

Welcome to the forums.

It is true that the lender sends form 1099-C when he forgives the debt. And, the borrower has to pay taxes on the forgiven debt. But if he can afford, the borrower can always pay off the debt even after a few years and then claim the refund from the IRS. There is a specific time period within which this should be done. So, no one's saying that the debtor has to pay off the debt, it's just that if he is able to gather funds after the charge-off, then he can pay off the debt and improve his credit.

Good luck :)

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

we had a forclosure in2007. the mortgage company is saying that after they sold the house, thier was a deficiency of 50 grand. they have charged the debt off, and a collector is after the money. are we obligated to pay the debt, i know the credit issue. Also since our debt was not forgiven do we get a 1099?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

ALSO WHAT IS THE TAX OBLIGATION WITH THE NEW TAX LAWS, AND DEBT FORGIVENESS LAWS. ?

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Priya,

Welcome to the forum.

Your debt is not forgiven. So I think you will not get a 1099-C form. This form is given when the lender charges off the due debt.

According to the new debt forgiven Law, if the lender forgives the due debt then you need not to pay tax on the forgiven debt.

Feel free to ask if you have any further questions.

Best of luck,
Larry

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Priya,

Your debt has been charged off which means it has been canceled or forgiven. Hence you will be issued a 1099-C Form which implies that the mortgage company has stopped all attempts to recover the debt. However, they shouldn't have sold it off to a collector.

Formerly the 1099-C Form also implied that you need to pay taxes on the canceled debt which is reported to the IRS as your income. That's the reason this form is being sent to a borrower as well as to the IRS.

However since the Mortgage Forgiveness Debt Relief Act of 2007 is already into effect, therefore you need not pay tax on the canceled debt and hence the lender might send you the Form just to keep a written proof of the fact that he has canceled your debt.

Regarding the collector asking you for the debt, I suggest that you talk to the lender and clarify this. If he has charged-off the debt, he shouldn't collect it. This is not an unsecured debt that he'll ask the collector to collect on his behalf. Instead of collection, mortgages are being foreclosed when a borrower defaults.

Good luck

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Your debt has been charged off which means it has been considered as uncollectible by the lender. But it is not canceled or forgiven. Hence a 1099-C Form may not be issued. However, since the debt is no longer secured (as property is sold off), therefore the lender has sold it off to a collection agency and now it's the latter that will try to collect the unpaid debt from you.

Since the debt is not canceled, therefore the question of paying tax does not arise here.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I live in Colorado and the 1st mortgage Foresloced on the property. What are the chances of the [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] company filing a 1099-C or coming after me....legally. HELP!!!

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Aristea.

Now talk to the second mortgage company. Will the second mortgage be paid off with the foreclosure sale? If not then they can come after you for due loan amount and they can even place lien on your other properties. But if the company forgives the due loan then the second mortgage company filing a 1099-C.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Yes of course, you are responsible for both...... :lol:
__________________________________________
Angel

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Mike,
Is there a way that I can find out more information. I don't plan to move and I didn't want to have my mortgage charged off. they were working on a loan modification for me I thought on both loans but some how they charged off the second loan. If it is truly charged off can they foreclose?

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Kevindsr!

Mortgage charge off does not mean that the property will go into foreclosure. It only means that the original lender is not interested to recover it from you so it has sold off the mortgage to a collection agency who will collect it from you. To know more about second mortgage charge off, visit the following link:
http://www.mortgagefit.com/know-how/secondloanchargeoff.html

You will have to pay your debts to the collection agency and for the first loan you will have to pay according to the alternative plan that will be told to you by the lender.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have a 1st and 2nd mortgage on my home. If my 1st mortgage company foreclosed on my property, am I obligated to pay the 2nd mortgage. If so, where can I receive help?

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helping_user's picture
helping_user | Joined: March 31, 2006 03:39 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Loretta.

When a first mortgage company forecloses the property, the second lender sends a representative to the auction. This representative has to see whether the home is sold off at a price such that the second lien is paid off along with the first. However, if the sale price isn't enough, you're obligated to pay the second.

[quote:dad66f5e1f]If so, where can I receive help?[/quote:dad66f5e1f]
What kind of help are you asking for? Do you wish to negotiate with the second lender and reduce your payments or are you looking for emergency mortgage assistance programs?

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Our house is due to be sold January 6th. 2009 . We are in contact with our mortgage co. . And they are going to do a loan modification . To try to rectify the situation . But we were told that the 2nd. loan was charged off . And that we can call later on to deal with that . What does this actually mean ? Is a modification the usual in this type of situation ? To save our house from sale ? And can the 2nd loan be saved ?

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Hopeful,

As far as I can understand from your question, you had two mortgages on the property. The lender has agreed to do a loan modification for the first mortgage whereas they have charged off the second mortgage to a collection agency.

A loan modification is a good option in this kind of situation. Here the lender will give you an alternative payment plan through which you will have to pay off the dues.

The second mortgage is charged off. This means that the lender is not interested in collecting the second mortgage dues from you any more and thus it has sold your loan to a collection agency. Now it is the collection agency whom you need to pay the second mortgage dues. Charging off second mortgage does not mean that the lender has forgiven the mortgage. You can call up the lender and ask them about the collection agency to whom they have sold the second mortgage.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Just for anyones info. We had an 80/20 loan with the same company. We did a short sale and they agreed to forgive the balance so we got a 1099-C on both loans, but because of the new law, we didn't have to include it as income for taxes.

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Well it's great that your debt was forgiven and you didn't have to pay the taxes too!!

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My client is being told the lien will be released with a Satisfaction if the 2nd mortgage is "charge off"?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi eddieinab!

Welcome to forums!

[url=http://www.mortgagefit.com/second-mortgage.html]Second mortgage[/url] charge off means that the second mortgage lender is not interested in collecting the dues from you. Thus, it has charged off the account. The collection agency will in turn collect the dues from you.

You will have to satisfy the debts and clear the title of the property.

Sussane

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Realgeni's picture
Realgeni | Joined: April 13, 2009 08:03 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

eddieinab you have to work with collection agency to pay off your debt. Lot of times they will negotiate and settle for lower payment.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

our 2nd was charged off now and we are about to finish up our short sale. this short sale will satisfy the first mortgage, but we just found out about the charge off when we called the bank to negotiate what amount of money they would take to buy off the second. we already live in a different hour. what should we do about paying the second now and can we still try to have the second paid off with the short sale?

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Realgeni's picture
Realgeni | Joined: April 13, 2009 08:03 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

jaqueline jo

Welcoem to teh forum

If your second is already charged off , that means they have marked it as loss in thier accounts. But it does nto eman that the bank will stop collecting that money. They may transfer this to a collection agency for collection.

Probably since its not been too logn, you can call the bank and see what need to be done to settle that before it goes in to collection It is probably easier to work with the bank than a collection agency

Good luck and feel free to ask

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If a car gets repossed voluntarily can the lender file a 1099c and will the irs be able to take any tax refund I could be getting ?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

In my opinion, the lender can issue a 1099c and the irs can take away any tax refund that you could be getting.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I was going through foreclosure, and discovered that my 2nd charged me off. I finally figured out my mortgage with my first, and have begun paying again as of 3 months ago. Yesterday, I got a call from a collections agancy that said I owe them $72k. What do I do about this, if you say I don't have to pay. Thanks

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi MW,

A second mortgage charge off does not mean that your second mortgage dues have been forgiven by the lender. You are still liable to pay off the mortgage dues. The collection agency would collect the dues from you. In my opinion, you should negotiate with the collection agency and try to lower your payments. This may help you in paying off the dues.

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i recently received a mail from my lender saying to pay them what i owe on the 2nd otherwise it will be in foreclosure.i do owe them for 8 months .My first is with the same lender n is current. can they foreclose my home?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi jk,

The lender has all the right to foreclose the property if you're unable to pay off the dues. In my opinion, you should contact them and check out if they can give you a payment plan to clear off the dues.

Thanks

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boosted95's picture
boosted95 | Joined: October 12, 2009 11:12 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am trying to following this as I have a first mortgage in which I am currently in a repayment program on. The second mortgage has been charged off and I have a tax loan as well.

I am considering just getting out of my house completly and moving in with my parents. I owe too much on the house and have too many repairs. So what options do I have?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi boosted!

Welcome to forums!

As far as the tax loan and charge off is concerned, you will have to pay it off. You can negotiate with the collection agency for a payment plan and pay off the dues. In case of your first mortgage, you can apply for a deed in lieu of foreclosure and sell off the property. You won't be liable for the deficient amount resulting from the sale. However, it would lower your credit score by 250 points.

Feel free to ask if you've further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

if the first loan forecloses on me since the 2nd load has been written off and i have a tax loan. should i file bankruptcy, will this clear everything?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

[url=http://www.mortgagefit.com/know-how/filebankruptcy.html]Filing bankruptcy[/url] won't clear all your dues. The lender will still hold the lien on the property though you file for a bankruptcy. You will have to pay off the dues to the lender as per your payment plan. If you file Chapter 7 bankruptcy, then you will have to reaffirm the loan and pay it off. If you do not pay the dues, the lender will foreclose the property. Moreover, a bankruptcy does not discharge the back taxes. You will have to clear your back taxes.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My mortgage company charged off my loan and said I do not have to pay until someone picks up the loan. Right now I have noone to pay no way to pay if I did either but I was not told anything of having to pay any type of tax other than property tax. I have no idea what is going on or what this really means. Can you explain exactly what I should expect?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi cynthia,

Your lender has charged off the loan. This means that your lender is no longer interested in collecting the dues from you and has sold off your mortgage to a collection agency. The collection agency will in turn collect the dues from you. To know more about charge off, check out the following page:
http://www.mortgagefit.com/know-how/secondloanchargeoff.html

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

OK Mike! What if I am moving in 5-10 years? What happens to the cloud?

Like | Dislike | Share | Posted: Thu, 02/04/2016 - 23:59 | Post subject:

gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i disagree in part with what you've said jameshogg. a charge off is a financial action on the lender's books, indicating that they don't anticipate receiving payment on the loan. it's not that they're no longer interested in receiving payments; it's that the borrower hasn't paid in such a while that they figure it's a lost cause to expect any further payments.

the money is still owed, and they may not have sent the account (yet) to a collector.

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