subject: How to settle debts after foreclosure [print this page] How to settle debts after foreclosure How to settle debts after foreclosure
Problem: "I have a debt of $300, 000 while attempting to build a real estate empire. My creditors have tapped my 401(k), and have drained my other savings. I have been trying to pay up through several low interest rate credit cards and now have run balances on 11 cards approximately. Eventually, I got late with a payment and then interest rates rocketed high. I lost my home in foreclosure 6 months back and was supposed to pay off the balance amount. However, I was not in a position to pay up the deficiency and the debt got charged off. Now I get collection calls and they are frightful most of the times. My resources are drying up fast and I think I should file bankruptcy. Should I file bankruptcy or is there any other way to get out of this?"
-Robert Mollus
Solution: Filing for bankruptcy should be kept as the last option when all other options fail. You should act before your debts attract a judgment. You may seek debt settlement with the collection agency if you have some savings to pay up the debt.
In many cases, the money that comes from a foreclosure auction is not enough to pay off the mortgage as well as other secured loans on the property. This deficiency balance is to be borne by you. The collection agency (CA) may also file lawsuits against you. Hence, settling your dues may not be an easy task but you can still try and negotiate with the CA to settle for a lesser amount. Collection agencies usually do not readily agree upon settling any dues. They would first try to get you to pay up the whole amount, because settling would mean they would be paid less than what you owe.
Draft proper debt settlement letters to be sent to the collection agencies mentioning why you want to settle, and how it is getting difficult for you to pay up your dues. You may try and speak with a senior executive regarding the same. It may take you quite some time before you can convince the collection agency to come to any agreement with you. Once the CA agrees to settle the debt, get it in writing. You may need this for future reference, so make sure you get a written agreement from the CA.
In case you cannot do the negotiation yourself, you may seek help from a professional. They may charge a certain amount as one-time payment but you will feel relieved to have the debt get off your shoulders.
