We forclosed over a year ago. The third mortgage lender is suing us for the delequent amount but the loan has been charged off.

Our home was forclosed on in March of 2008. We had a second and third on the home. Both have been charged off but now the third is suing us for the amount owed. Can they do this. We have heard that once a loan is charged off they cannot sue for collection. Please help us… we have no idea what to do. Thank you very much.

Asked on June 15, 2009 under Real Estate Law, Colorado

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

If the 3rd mortgage truly was "charged off" in the sense that the mortgagor wrote it off as a loss and took the tax advantages for writing it off, then no, they can't then try to collect. (After all, if they did collect, then they'd have committed tax fraud--they'd have taken a tax loss for something they were in fact paid for.) However, it's only if they did actually write off the loan that they'd be barred from collecting. Just because they may have "given up" previously on collecting it doesn't mean they can't try to collect it again now. So the question becomes whether the loan was truly written off or not. If you have evidence that they did write off the loan previously, you could contact your state's consumer protection bureau or attorney general's office and file a complaint that the creditor is trying to collect on a debt that has been written off. Without evidence of a write off of the debt, there's no reason to assume the collections efforts are improper; you probably will want to retain an attorney in that case to defend you from the collection effort.


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