Can a lender collect on the Deficiency collection after a forceclosure

uestion from R (contact info withheld)

Subject: HELOC debt collection (Sent via Activerain)

My home foreclosed back in Oct. We had an offer on the house, but the the two lenders could not come to an agreement on how much the second (WAMU) would get. The first lender decided to let it go to auction, no one bid on it and they got it back and proceeded with the sale. Second lender WAMU didn't get anything. I saw on my credit that WAMU charged off the loan, so I thought it was taken care of, then I got a letter from a collection agency in New Jersey. Apparently WAMU sold the debt to them. What I want to know is can they really come after us for it? We can't afford to pay anything to the collection agency, but we don't want to file bankruptcy if they can't even collect from us. What is your advice?

Your answer depends on quite few factors. (this is only general advice - I would need more facts to answer your question directly and give you legal advice)

1. State the property is in?

2. If it is in CA - was the loan a purchase money loan as described and protected by CCP 580b

3. Was the second a sold out junior of a recourse debt? see and understand cases surrounding CCP 726.

4. Is there a chance the doctrine of merger applies?

5. Don't be fooled by charge off language. Banks and collection agents use charge off many different ways.

(As an aside I had one collection agent say to me - you client has to pay us in 48 hours; if they do not pay we will charge off this loan. I said great will you release your lien?. he said no. I said does that mean my client does not have to pay. He said no. So, I said, your point is?

He had no response. (his best response would have been the charge off will effect my client's credit.) Citi plays this game all the time. Chase has played it with me once.

Before you jump into a bankruptcy, you should determine if you actually owe the money. If you do, then you might want to offer a few cents on the dollar.

This is very general advice. There are exceptions to every rule. You shoud have your facts reviewed by an experienced attorneys

San Diego short sales and California loan modification information