If I negotiate a lower amount to pay off an equity loan how is my credit affected?
Question Details:
I am an owner 50/50 tenancy with someone who was informed by a bankruptcy attorney that if we stop paying the EQ Line payment for at least 60-90 days, he can negotiate with the lender a lower pay off amount. How will that affect my credit since my name is also on the loan? In addition I was told that if some of the debt is forgiven there is something filed with the IRS. I need help - as the other party seized control of the EQ Line loan and claims to have used it for his failing real estate vendors out-of-state which has led him to file Chapter 7.
Real Estate Law Answers
First, it will show up as a 60-90 day mortgage delinquency on your credit report. That is a major hit to your credit rating. Second, you will receive a 1099 from the lender for the difference between the loan balance and the amount they accept as pay-off. That difference will be taxable income to you. Third, it sounds as if your partner has embezzled from you. You need to get a bankruptcy adversary proceeding filed against him right away, or he may be discharged from the liability and you will be left holding the debt.
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