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TJ, Esq.
TJ, Esq., Attorney
Category: Legal
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Experience:  JD, MBA
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I married Connie in 2001. In 2003 I provided $40K for her to

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I married Connie in 2001. In 2003 I provided $40K for her to purchase us a marital home for $168K in her name solely. First mortgage was $128K in her name only. In 2003 she obtained a $29K heloc for renovations. I signed only as personal guarantor on the heloc. She filed bankruptcy in 2005 against all debts. I recently discovered the 2nd mortgagor released all claims to the property in 2006 in conjunction with her bankruptcy. In 2006 we got divorced. In 2011 she died of cancer. The 2nd mortgagor continued to send monthly statements and I paid the monthly payments, but also drew down on the credit line occasionally as I discovered I could. The current balance is $24K and the loan matured 9/10/2013. Upon receiving notice the loan was about to mature I went to the bank and offered to pay off the loan on a monthly basis with the same payment of $400 a month. I do not have sufficient assets or funds to pay the entire balance due. They denied this unsecured loan to me on 9/05/2013 and referred me to their "loss mitigation dept." The loss mitigation dept. has contacted me twice as recently as 9/10/2013 requesting tax returns, proof of income, etc. Obviously considering my offer. The property and associated debt went through her bankruptcy in 2006, was foreclosed on and is gone.
I'm thinking I might not owe them anything as they surely had to write the debt off on their books when they released their claim in 2006.
I am a CPA. Should I continue to make monthly payments, consider the matter closed or what?
Hello and thank you for allowing me the opportunity to assist you.

Q: I'm thinking I might not owe them anything as they surely had to write the debt off on their books when they released their claim in 2006.
I am a CPA. Should I continue to make monthly payments, consider the matter closed or what?

A: Unfortunately, it doesn't work that way. A write-off, as you know, is an accounting term used for bookkeeping and tax purposes. Unfortunately, it has nothing to do with liability. Even after a debt is written off, liability remains against the borrower. If they recover, then they adjust their books and taxes accordingly. Therefore, I'm sorry to say that even if the debt was written off, you are still liable since you are a guarantor.

Similarly, neither the bankruptcy nor foreclosure affects your liability. The bankruptcy only affected your ex's liability since she was the party who filed for bankruptcy. The foreclosure merely means that the security (i.e., collateral) was sold to help pay for the loan balance. Anything left unpaid, however, remains as a debt.

If I were you, I would continue your efforts at trying to negotiate a settlement or payment plan. Of course, if the balance is large enough (or if you owe other substantial debts), then you may consider bankruptcy yourself.

I am truly sorry to give you this bad news, but please understand that it would be unfair to you (and unprofessional of me) to provide you with anything less than an honest response. However, if your concerns were not satisfactorily addressed, then please let me know, and I will be happy to clarify my answer. I do ask that you rate me based upon whether I answered your question, and not based upon whether the answer was good news or bad news. Your positive feedback is greatly appreciated. Thank you for using our service!

If you would like to direct additional legal questions to me in the future, then please type "To VAMD" in the subject line of your question.
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