Dealing with Banks Recovery Departmet After Short sale

giacona

LoanSafe Member
May 18, 2009
39
0
6
I was wondering if anyone has had any experince with lenders recovery departments. My short sale closed not even 3 weeks ago. Yesterday I get a letter in the mail from my 2nd lenders recovery department (PNC Bank). The letter says that my account was received by the recovery department with a balance of 29,759.62. It asks me to contact them and not to ignore this letter.

Could this be just an attempt for them to scare me and to try and get something out of me? Or are they coming full force. I was thinking of not doing anything now and wait and see if they send me a 1099c at the end of the year or not.

It's going to take them a minimum of 60-90 days to file a lawsuit for defeciancy and on top of that the court system is backed up. I am afraid if I contact them they are going to want personal information such as bank statments, pay stubs, etc which I don't want to send them.

In addition I am not sure if they have in house lawyers who would start the legal action or if they would have to hire an outside firm to do that. I am guessing it would be an outside firm and if they do, obviously it would cost them money to do this.

I did contact them yesterday but I could not speak to the person who sent me the letter. I kept getting their vm and I did not want to leave a msg with my new information b/c they will be calling me non stop. I did however speak to another person in the reovery department and they verified for me that the balance is still owed and thats where I left off.

So what do I do here?

I would appreciate any advice.
 

Enough Already

LoanSafe Member
Jan 22, 2009
538
3
0
FL
Giacona,

I'm no expert, but if it were me I'd ignore them, and I definitely would not give them any info! They would have to spend money to get a judgment against you, and they're not too likely to do that. They're just fishing to see what they can catch.

The banks can't afford to sue everyone who owes them money, especially when most people are broke. It would be a lose lose situation them. The banks are already taking loses on short sales and foreclosures - they can't afford to throw more money at collections.

If the debt has been sold to a collections company they most likely paid only pennies on the dollar for it, and it wouldn't be worth the expense for them to sue you either.

Good luck and please keep us posted.
 

scottp999

LoanSafe Member
Sep 4, 2009
52
0
0
It might be worth discussing it with them to see what you can negotiate so they will update your credit report to settled and maybe clean up any lates. If you can demostrate through a current Income statement, and they verify your other debts by pulling a credit report ,you may be able to agree to a smaller balance that you will pay over time at 0% that:

1) You will agree to only if they update your credit report to settled (you can try to get rid of late notations as well)
2) Stop them from selling the debt in the future to a collections agency that will call you for years.

Of course if you agree to a note, then get wording that agreeing to the note satifies the original debt in full.

I'm not an attorney, so do your own due diligence.
 

giacona

LoanSafe Member
May 18, 2009
39
0
6
Well I honestly do not care about my credit since it's alreday low due to the short sale and late payments. I know I may be able to negotiate that they remove stuff from my credit if i contact them and try and settle.

I honestly do not care about my credit right now. I am on an all cash system and debit cards. I don't use credit for anything anymore and probally wont. The only thing I will use credit for again is to purchase another home which wont be for a while and by that time everything should be removed and I should have no credit at all since I wont be borrowing money.

So I am going to take my chances here and see what happenes. If I get contacted by a law firm that they will file and lawsuit, etc then I will try and settle this.

If they send a 1099c which is what I think will happen, then all collection activity has to cease.
 

scottp999

LoanSafe Member
Sep 4, 2009
52
0
0
I really would like to see someone prove that a 1099c means they can't collect the debt (in deficiency/recourse states). I personally don't think that is the case.

They are issuing a 1099c to gain tax benefits for the loss in the year that they incurred it. The IRS considers that income to you in the year it occured, and you have to add it to your income if you don't qualify for the forgiveness act. I have never seen anything that tells me for a fact that a 1099c has anything more to do with whether you owe a debt. To me it is just an IRS tax event and not a release of liability for the original note.

I believe they still have the option to pursue what you did not pay, and a 1099c does not get you out of those potential obligations. If the lender is able to collect full or partial amounts they need to recognize those as income in the years they collect them to offset the benefits they got in the year the 1099c was issued. For the borrower there is no additinal tax write off from having to pay a collections account.

If someone can prove those assumptions wrong, I would love to see it.

Now it is debatable whether they have enough benefits to try to come after the loss, or sell it to a collections agency, but I am just talking about whether a 1099c has anything to do with releasing a person from their debts.
 

scottp999

LoanSafe Member
Sep 4, 2009
52
0
0
I do see many people saying a 1099C is the end of the process for the lender and they can not come after you any more once it is written off. I hope that is the case.

Good luck.
 

Enough Already

LoanSafe Member
Jan 22, 2009
538
3
0
FL
I agree. The problem is that we're all in the similar situations and looking for answers. We all do our best to provide accurate and helpful info to each other on this forum, but there are many questions.

I'm not sure either if the 1099C means the bank can't attempt to collect or not. From researching online that is what it seems to be, but who knows? I'd like to hear back on that for certain too. Anyone? :D
 

Enough Already

LoanSafe Member
Jan 22, 2009
538
3
0
FL
Thanks for the link. It does seem to vary quite a bit from state to state. I agree - I would definitely check with an attorney or CPA, or both.
 

ctn222

LoanSafe Member
Mar 18, 2009
4
0
0
Been there... done that ; and still dealing with it!! I did a short sale last year in august and now the lenders are still haunting me for the balance. I have 2 lenders , (1st-50k) and (2nd-15k) ; 2nd lender mailed a letter for defiency which I ignored; then they sold it to a big collection agency (which has the power to expedite these cases in court) and I ended up settling with them for 3k. Now I have to go through the same thing with 1st. I offered them a reasonable lump sum as payoff and move on, but they are too greedy and stupid to take it, saying that my credit shows that I could pay the entire balance (if that were the case I would have not done a short sale in the first place) ... So the current rep I am talking to is getting frustrated because they cannot close the deal. Since it is an unsecured debt I will let it sit and let them sell to collection agency and eventually will have to come to terms with the collection agency. hopefully the collection agency will be more negotiable. In short, you will have to deal with them one way or another...
 

rbolski_in_NV

LoanSafe Member
Oct 13, 2009
20
0
0
2 different lawyers I talked to said that the bank can and will do both at increasing rates. They will file the 1099c and come after you.
 

oc949

LoanSafe Member
Feb 16, 2009
43
1
0
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{mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} </style> <![endif]--><!--[if gte mso 9]><xml> <o:shapedefaults v:ext="edit" spidmax="1026"/> </xml><![endif]--><!--[if gte mso 9]><xml> <o:shapelayout v:ext="edit"> <o:idmap v:ext="edit" data="1"/> </o:shapelayout></xml><![endif]--> Can anyone suggest the most effective way to get B of A to waive their right to pursue deficiency after the short sale approval has been issued, but not yet signed by me?
I live in an anti-deficiency state (California) and received a short sale approval from B of A with the clause saying they can pursue the deficiency. And I know that they, or a collections company, can do this. You are only protected from this on a foreclosure and with a non-recourse loan. There is a myth that you are also protected in a short sale but you are not.
I am trying to get B of A to drop their clause and to waive their right to pursue a deficiency, but it is slow going trying to find someone empowered to do this.
Has anyone here done this successfully? Please provide me your suggestions for how to do so.
Thank you.
 

Enough Already

LoanSafe Member
Jan 22, 2009
538
3
0
FL
oc949,

CA is a non-recourse state, but not all loans in CA are non-recourse. If you're sure you have non-recourse loan/s I would tell them you're going to walk away if they don't waive their right to try to collect the deficiency.

I'll also recommend you check out the Deed in Lieu of Foreclosure section of this form, for more info on how to determine the non-recourse nature of your loans.

Good luck! Please keep us posted on how your negotiations go.
 

giacona

LoanSafe Member
May 18, 2009
39
0
6
my 2nd lender just sent me a letter stating they will accept 40% of the balance for paid in full if received in 10 days. I'm not going to respond b/c I don't have anything to give them right now, plus i want to see if they send me a 1099c or not. They may be be fishing to see what they can get. I pulled my credit and the 2nd is listed as charged off. If they sell the debt to a collection agency or law firm i will settle it then.

does anyone have any input
 

scottcollins

LoanSafe Member
Dec 15, 2009
65
1
0
If you get a 1099c (Cancellation of Debt) for the full amount of the loss, it's over between you and the bank. According to the IRS, the 1099c is filed when an agreement is reached to cancel all or part of the debt, or when the bank concludes the debt will never be repaid.

The bank may not file a 1099c until it has determined that it will cease efforts to collect the debt.

This is all laid out on the IRS webste. Just Google "IRS 1099c Instructions"
 

giacona

LoanSafe Member
May 18, 2009
39
0
6
does this mean they can send me the 1099c next year if they try and collect the balance in 2010? The short sale closed in 09 so I was guessing they will send the 1099 in 2009.
 

HopingtoFind

LoanSafe Member
Oct 7, 2008
2,084
28
48
Bay Area, CA
does this mean they can send me the 1099c next year if they try and collect the balance in 2010? The short sale closed in 09 so I was guessing they will send the 1099 in 2009.
If short sale closed in 2009 and they will not pursue deficiency they should send 1099c by January 31, 2010. That is the way I understand it.
Generally we get all tax related forms in January.
 

scottcollins

LoanSafe Member
Dec 15, 2009
65
1
0
does this mean they can send me the 1099c next year if they try and collect the balance in 2010? The short sale closed in 09 so I was guessing they will send the 1099 in 2009.
You should get a 1099c before January 31, just as hopingtofind wrote, if the bank is writing off the loan for 2009.

As I wrote, Form 1099c is actually called "Cancellation of Debt." Keep in mind, they can try and collect up to the point they report the loss to the IRS. Once they file the 1099c, they are reporting to the IRS that they wrote the debt off and that as a result, you incurred the value for that amount (plus any interest that may have accrued while they tried to collect), which must be reported as income.

If this was purchase money and you're in a recourse state, the amount is most probably exempt from federal tax. But be sure to see if you still have any state and local income tax liability on this money.