How can I get a bank to accept a settlement for a debt that remains on a second mortgage after a short sale?

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How can I get a bank to accept a settlement for a debt that remains on a second mortgage after a short sale?

In August I successfully sold my home as a short sale. The second mortgage holder received $5k from the proceeds. 2nd mortgage was $100k. They are now trying to collect 30% of the $95k balance from me in a lump sum payment. I have a total of $10k in savings and no assets. I offered 10% ($9,500) which the lady on the phone said she was willing to present to “upstairs”) but it was denied. She said they are unwilling to finance the settlement amount. What can I do to get them to accept the 10%?

Asked on November 17, 2010 under Bankruptcy Law, Maryland

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

There is nothing you can do to get them to accept 10% of the amount due them; that is, you can certainly try to persuade them it's the best offer then can get, so it's advantageous to accept it rather than go to the expense and trouble  of suing you only to end up with the same amount--however, at the end of the day, a creditor can insist on full payment of a debt. That means they can insist, if they wanted, on the full $95k and sue you if you don't pay it; and if they choose to settle for less, they have complete discretion to decide what amount, paid when and how, is acceptable to them. So you can try again, possibly by sharing you finances with them, to convince them this is as good as it gets; but if they won't accept it, you may need to consider bankruptcy as an option to discharge this (and any other) debts. Note that while you can't lie about your intentions, if bankruptcy is something you are seriously considering, you can tell the creditor that if you are sued for more than you can pay, you will have to look at filing for bankruptcy as an option.


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