How best to negotiate witha debt collector regarding a defaulted second mortgage?

My home was foreclosed on in 2007. I had a second second, which was a HELOC. It was for $85,000. Now that note has been sold. They sent me a notice in 04/10, asking for a payoff of $22,000. I received an envelope with some court papers they are planning to file if I don’t pay. So I called them and now they want $13,500. Just don’t know if I should pay them or not. I have $20,000 in a retirement fund, of which I can pull $10,000.

Asked on July 27, 2010 under Bankruptcy Law, California

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

What you need to do is to look at your state attorney general's website and see if there is a list of agencies that help with foreclosure and consumer debt.  What happened is that they are going after you for what is known as a deficiency judgement, meaning the difference in the amount that they sold the property for, which was less than the amount of the mortgage.  Generally when a party knows that they are going to be in the position to have their house go in to foreclosure they try and negotiate this issue.  But someone needs to look at what happened here and see if they can help.  As for the court papers, have someone look at them.  They may already have filed.  If you are judgement proof it may not matter.  Certain assets are protected from Judgement creditors. Also ask about bankruptcy.  Good luck.


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