Q. This past summer we completed a short sale on our home. There was a first and second mortgage holder, and the first mortgage holder (major financial institution) assumed the second during the final negotiations. It was our assumption all debt was satisfied (and you know what you get when you assume).
Since the time of the closing, we have been forced to relocate out of the US due to the severe economic situation, and our dire circumstances requiring the necessary support of family/friends. It now appears the debt has been turned over to a collection agency located in Nebraska. They’ve contacted us and told us that they will be pursuing a judgment if the debt is not satisfied. Not sure how to deal with this and what the appropriate legal recourse should be.
We contacted the original creditor (major bank) and they refused to discuss the debt, stating “they have too many of these on their books” and referred me back to the collection agency. From everything I have read, it is iterated NOT to send any funds to the collection agency, nor give them any additional info. Any thoughts or ideas would be greatly appreciated.
A. First and foremost, it’s common practice for a collection agency to tell you they will be suing you; this could be the $10/hr collection agent saying whatever they think might be scary enough to get you to pay. Don’t worry about a lawsuit until it actually happens. Note: This can be a violation of the Fair Debt collection Practices Act if they don’t actually follow through, just FYI. Take note of what they tell you and file this information away carefully.
Yes, your second mortgage is now unsecured because the house was sold and the second mortgage was unsatisfied, even if the original lender assumed the debt. The second mortgage becomes a debt similar to an unsecured credit card debt. The bank can sell or assign this debt to a collection agency or junk debt buyer. So, yes the collection agency may sue you for it and if they win, get a judgment.
A defense often used by debtors is the statute of limitations, meaning the legal time a creditor has to sue you after the debt is charged off. What if you return after 10 years and the statute of limitations is 6 years? You’re home, free, right? Not so fast.
You should consider a how the statute of limitations is tolled, depending on your state, meaning that the statute of limitation on a debt is put into a timeout until you return to the US. We published a post on the tolling of statute of limitations July 27.
If you are sued while out of the country? Since you live out of the country, you could argue improper venue or move to dismiss based on the fact that it would be a hardship for you to return for a court date. But that’s a story for another day.
Have you left the country with unpaid debts? Have you returned from your time abroad to face these debts? Tell us about it by leaving a comment!
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I am in the same situation also, but not yet at the short sale.
I need help fast. I am a US citizen but a Canadian permanent resident (finalized March 2010). I bought a house in Maine 4 years ago. I moved to Canada 1 year ago because I got married to a Canadian Citizen and was offered a good job. My house has been vacant for 1 year and I am not late (yet soon will be) on any payments. My house has been up for sale for 1 1/2 years now and nothing due to the market and the state of the US. I have a mortgage and a home equity loan on the property.
I will be very soon, be behind on my payments, therefore will look into a short sale of my house, but that is no guaranty. If it does foreclose, I know that Maine state laws states that they can do a deficiency judgment on the difference between market value (which is not good now a days) and what is owed and that is if it even is sold at an auction. The judgment will be around 20,000 or more depending on the auction.
I have no plans of moving back to the states and my credit is perfect there and now I am establishing my credit in Canada (I have taken out a line of credit and one credit card). I just can’t sell my property and I can’t pay 2 mortgages any longer.
My question is can they come after me in Canada on a US debt from foreclosure and what are the repercussions if I don’t pay the deficiency judgment? Need help fast so I know what I am facing, can they garnish my Canadian paycheck, bad credit will follow me to Canada, and if I do ever go back to the US what will I face? I am hoping that you can answer me soon as I have about one month before I am behind on payments.
Some more history, I have tried to rent it but can not rent it for enough money to pay the payment either, tried that and it put me in a worse situation than I was before I rented the property out, so that is not an option either.
No company is going to cross international lines to collect from you. If you had committed murder in the US and fled to Canada, they might extradite you back to the US, but you are safe.
I’m not sure if creditors in Canada will pull your US credit report. I am not familiar with Canadian credit at all.
Dear Kristy,
Thanks, creditors did pull my US report just to verify that I did have good credit to start new credit here in Canada. But now that I have started my credit here in Canada, if I apply for more credit than I don’t think they will from now on because I have something up here to work with.
Thank you again for your quick reply to my questions.