2nd Mortgage Charge Off

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my 2nd mortgage, which has been charged off. I dont have the exact date on hand, but it has been long enough it has dropped of my credit completely. I still own the home, and I pay my 1st mortgage on time, no issues (since my modification was done in 2013).

I see the SOL in colorado has passed for this debtor to sue, or continue to attempt to collect from me. I want to settle the debt, I am hoping they will take a cash settlement for a % of the total balance, in exchange for a full release of the lien. I wrote them a letter requesting this, and received a letter back stating they only negotiate over the phone, then once a settlement is reached, they will provide it in writing. I would love to get this lien released, one concern i have is will it re-start or re-appear on my credit? I would ask this to be part of the negotiation but i dont know if i have the power to technically demand that.

I believe my only other option to cancel this debt may be claiming bankruptcy, and i really want to avoid that at all costs as I have spent the last several years rebuilding my credit. This is my one hold up.

What are my options?

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Posted by Anonymous
Asked on October 5, 2020 1:45 pm
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The lien survives even if they charge off the debt. So, claiming bankruptcy would do nothing to remove the actual lien unless there was a possibility of using a 506 Motion to void the lien, but that would mean the value of the 1st mortgage would exceed the value of the house making the 2nd mortgage wholly unsecured.

If there was ever a re-finance or sale of the property the debt would probably have to be paid even if they are not trying to collect it. Also, there is a case in Colorado that clearly states unless the mortgage company "accelerates" the debt, there is not a statute of limitations that applies to collection. A "charge off" notation on the credit report does not amount to an acceleration per the court ruling.

So, in all likelihood trying to settle the debt wouldn't have any impact on the statue of limitation as it is likely the debt was not accelerated. It likely would be a good idea to try to settle.

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Good luck to you.

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Posted by Bill Henry (Questions: 1, Answers: 75)
Answered on October 5, 2020 3:06 pm