Monday, July 12, 2010

Got Questions? Get Answers...SU Needs A Reputable Professional To Stop The Loss In Savings



I don't even know who to turn to for advise on these matters. Do I need an attorney, an accountant or a mortgage advisor? And how do I find a reputable one?

I lost my job 13 months ago and decided to take most of my savings and put it into a business with my new husband. My house has been on the market for 8 months and I am hemorrhaging $2500 from my savings each month to keep up with the payments.

I am down to my last $10,000 in savings and I really don't want to keep throwing my money into a black hole. The house still has a small amount of equity in it, about $10,000

The house is in my name only, but I bought the business jointly with my husband. What are my options? Can the bank come after my business? The business is not profitable at this time due to start up costs. My husband is already using his 401k to fund the business.

Any advise appreciated.

Thanks, SU


Dear SU:

You are at a critical juncture. In a short period of time you will spend all of your savings. Your husband is depleting his 401k.

It is easy to tell you to stop wasting all of your savings on mortgage payments. However, it’s just not that easy.

Please consider the following:

A bank or creditor has the right to place a lien on your business asset if it obtains a court ordered personal judgment against you.

This assumes that the bank can prove you owe it money. The only instance in which you would owe the bank money is in the case of a deficiency. A deficiency debt is the difference between what the bank collects after the sale of your property and the balance of the mortgage loan (including fees, late penalties, legal fees, escrows, and unpaid interest.). A deficiency means the lender does not collect the full amount due on a mortgage loan. A deficiency debt can give rise to two different scenarios 1.) a deficiency judgment or 2.) debt forgiveness. A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note or mortgage loan, in full. This takes a time in court. Also, you have the right to defend yourself. I advise you to speak with a legal professional in order to understand the legal process.

In the case of debt forgiveness, when a debt is forgiven it can be viewed as a taxable event by the IRS and your state taxing authority. Forgiven debt is income. Please
click this link to learn more about deficiency obligations, deficiency, and forgiveness.

Certain states do not allow lenders the right to obtain a deficiency judgment. This is called a non-recourse state. Please
click this link to learn more about non-recourse and recourse states.

The following are the primary risks of a strategic default:

1. You will have a deficiency debt.
2. Lower credit score.
3. Loss of the home or property to a foreclosure sale.
4. Recently, Fannie Mae implemented a rule that bans a person from obtaining a Fannie Mae mortgage, if that person strategically defaults. The ban last for seven years. Furthermore, the United States Government may pass a law that bans a person from obtaining a government insured loan, if that person strategically defaults. Please
click this link to learn more.
5. Debt collections tactics, including mail, letters, personal visits to the property, phone calls to cell phone, work, and/or family members. Not all debt collection tactics are legal. You should become familiar with your state’s debt collection protection laws and the Fair Debt Collections Protections Act.

You should utilize the services of a legal professional and a financial professional. Your goal is to find a professional with experience in your type of matter. You can do a search online to learn more about a professional. You can also ask for a meeting to evaluate them. Furthermore, a local professional association may be able to refer you to a reputable professional.

You need to understand your risks. Your goal is to make a decision that will not expose you to any deficiency to the lender. You want to walk away without owing the lender another dime out of pocket.

I hope this helps. Feel free to write back.


Augustine A. Diji

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