A “charge off” is not the same as debt forgiveness
In the world of Orlando real estate when you hear the words “charge off” coming from your lender, it basically means that they are throwing their hands up and giving up on collecting that particular debt, the debt that’s being charged off is also known as a “write off”. It’s an internal accounting technique that companies use to balance their books by writing off the debt as uncollectible. When you’re working with short sales you hear this term quite often.
This is the part where it can get a little confusing. For example, a “HELOC” or “home equity line of credit” is a second mortgage secured by your house in which the lender that gave you the “HELOC” thought it was a sound investment for them at the time. The term “charge off” in this case just means that the bank is no longer continuing to bug you with annoying phone calls and letters and they will take a charge off on their books.
However, this doesn’t mean that it ends there. Most of the time the lender will sell the bad debt for pennies on the dollar to a much more aggressive debt collector. If you thought the original bank was annoying, these companies are often 10 times worse. I’ve gotten reports from some of my clients about these companies calling at least once or twice a day, every day including weekends. I consider these companies to be in the same category as telemarketers.
There are only 3 ways to get mortgage debt collectors off your back
1- Bankruptcy 7 or 13
Bankruptcy Chapter 7 and 13. I’m not an attorney and I’m not about to go in-depth on the subject of Bankruptcy laws but in a nutshell, If you file for chapter 7 BK, you are pretty much surrendering all of your assets to the BK court with the exception of your homestead property as well as a vehicle as long as neither of them holds significant equity. This type of BK will end any pending lawsuits as well as any repossession debts.
Chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time.
2- Loan modification
Loan modifications make sense when you are able to get the lender to not only adjust your payments but to reduce the principal balance of the loan. It just doesn’t make sense to me to agree to a loan mod if the terms only benefit the lender. Don’t get me wrong, for some people it works out, but in my experience lenders almost always try to design loan mods in a way that benefits them thus setting up the homeowner for failure…and the beat goes on. Read the fine print!
3- Orlando Short Sale
Now, this is a subject that I am very qualified to talk to you about. Orlando short sales are the preferred method for most people to eliminate their underwater mortgage problem. Orlando homeowners usually come to me after they consult with a Bankruptcy attorney realizing that a short sale is by far their best option. By completing an Orlando short sale on their home, a homeowner is able to rid themselves of their largest debt by far,.. their mortgage. On top of that, homeowners are able to come away with cash from the closing of the transaction, sometimes up to $30,000.00. [not a typo] thirty thousand U.S. dollars.
A short sale also is the lender’s preferred alternative to foreclosure and is often the best option for everyone involved. The only people that don’t care for short sales are Bankruptcy attorneys because there’s no money in it for them.
