Is it normal legal practice in a foreclosure to take care of both debts? If so, how can I get this company to write off the balance?

In Paynter v. Maggiolo, 105 N.C. App. 312, 412 S.E.2d 691 (N.C.App. 02/04/1992), the NC Court of Appeals ruled that where subordinate note secured by real estate, states on its face that the loan is made "to secure to the seller the payment of the balance of the purchase price of real property," the lender cannot recover any unpaid deficiency balance from the borrower in the event that the property is foreclosed.

Assuming that your second loan falls within the scope of the above provision of law, then you could file a dispute letter with each of the three credit reporting agencies (Equifax, Experian, Transunion), provide your evidence that you are no longer liable for the debt, and demand that the credit reporting agencies identify the loan account as being uncollectable. However, per federal law, the indication will remain on your credit report for seven years from the date of foreclosure. So, if the loan was foreclosed in 2007, your credit report will retain the negative entry until at least 2014.

Concerning having the lender note that the loan is charged off, you can't force the lender to do so, until such time as you are actually damaged by the lender's actions. This will not occur until the original foreclosure date in 2014. After that, if the account remains identified negatively because of the lender's failure to charge off the account, you can sue the lender and the credit reporting agency under the Fair Credit Reporting Act, and obtain a court order directing each credit reporting agency to remove the negative entry, and to pay your attorney's fees and costs of suit, plus up to $1,000 in civil damages against each credit reporting agency and against the lender (up to $4,000).

Hope this helps.

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