How do I protect myself from a real estate payoff situation?

UPDATED: Sep 30, 2022

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How do I protect myself from a real estate payoff situation?

I’m selling a townhouse and I owe several creditors whom I want to payoff and be debt free. I have to divide real estate profits between them but want them to consider the amount

Asked on October 15, 2016 under Bankruptcy Law, Colorado


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

It is only considered paid in full if the creditors agree to accept it as payment in full. Otherwise, if you make a partical payment to a creditor, they are entitled to take it, apply it against the balance you owe, and still come after you for the rest. So it is imperative that you get their agreement to accept what you give them as payment in full in writing.
Of course, their agreement is voluntary: you can't force them to aggree to accept less than full payment as payment in full. But you have leverage: smart creditors will typically agree to accept less than full payment as payment in full as an alternative to possibly getting nothing at all, since if they don't agree to your terms, you won't give them anything; and while they could sue you for the money, there is no guaranty that they will recover anything if the money is, in the meantime, paid to other creditors. So it is likely in their interest to agree.
(Note: you don't need the agreement of anyone whom you can and do pay in full: payment in full is payment in full.)

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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