Writing a debt settlement offer letter

Why should I try to save money? You might need money for an emergency. You also might need to buy something more expensive, like a car.

Writing a debt settlement offer letter

With secured debts, there is always collateral at stake, in the form of property like a home or vehicle. How is it possible to settle a second mortgage? Obviously, every real estate situation carries its own unique set of numbers, but if conditions are right, settlement is possible.

It all starts with whether or not there is equity remaining in the property after the first mortgage is satisfied.

In such cases, it may be possible to negotiate a great settlement with the second mortgage holder. Settlement of second liens breaks down into two main categories — before foreclosure or after foreclosure. Settlement of second mortgages prior to a foreclosure action being initiated by the first mortgage lender is possible in many cases where the second lien is totally exposed or even just partly exposed.

A short sale often leads to this type of negotiation. But there have also been cases where the debtor stayed in the property, obtained a loan modification from the first lender thus avoiding foreclosureand successfully settled with the second mortgage holder.

Why is this possible at all? Why are lenders accepting such low settlements on second mortgages on these types of accounts? The critical factor is that second liens can be stripped in Chapter 13 bankruptcy i.

Lenders know this, so they walk a much narrower tightrope than credit card banks do in terms of collection practices, just based on the huge dollars involved. Push too hard, no recovery. Once a home is lost to foreclosure, there is often little or nothing left after the auction sale to cover the second lien, leaving the second lender holding the bag.

Adding insult to injury, many former homeowners are shocked to learn that foreclosure does not end the potential financial problems associated with the lost property. How should such a situation be handled? Should you negotiate a settlement, or simply ignore the threats?

So far, lenders have been reluctant to litigate these claims, and no clear pattern of legal collections has taken place relative to second liens, pre or post-foreclosure.

For one thing, the SOL period varies from state to state, all the way from 3 years in states like North Carolina, to 15 years for Ohio, with most states having an SOL period of years. For the average person, three years or more is an unacceptably long time to wait with crossed fingers hoping that nothing bad will happen meanwhile.

It will sit there on your credit report, and even if after time it no longer affects your FICO score, virtually all prospective lenders will treat it as an open obligation. Goodbye new mortgage, refinancing, auto loan, etc. Perhaps more importantly, as they say in the investment industry, past performance is not a guarantee of future results.

We can expect a take-no-prisoners approach from the worst of them, and unrealistic settlement requirements from many others. Let me inject some very important caveats. I am NOT suggesting that consumers start purposely defaulting on their second mortgages simply because they are out to save some money or get better loan contracts.

Some creditors are much more stubborn about settlement, depending on the type of loan, whether it was packaged for sale to investors, and so on. In closing, the best general advice I can offer is to step back from the emotions associated with any property that you own.

Look at the raw numbers and let the math do the talking. Check the current value of your property and assess where you stand in terms of the second mortgage.

writing a debt settlement offer letter

Consult with a professional financial advisor knowledgeable in this area, but be wary of anyone promising a quick fix for mortgage problems. Settlement of any large contractual obligation like a mortgage or note requires patience, commitment, and determination.Veteran debt consolidation programs, such as military debt consolidation loans (MDCL) help veterans get out of debt.

Learn more about how they can help. Making a debt settlement offer in writing: Considerations to make. I compare sending a letter to a debt collector offering a settlement to playing Poker with your cards face up on the table.

This is an example of a letter of demand for debt owed. Case study - Meena and Fantastic Florists. Meena runs a small business from home, doing website design and IT . Jun 12,  · A good debt settlement proposal will offer to pay from 40 to 60 percent of the total debt.

Make sure that you offer somewhat less than you are prepared to pay, as you may need to negotiate with your creditor, increasing the amount of your payment in exchange for more generous payment terms or an improved credit rating%(29). More on California Debt Unemployment & Foreclosure.

California has come a long way since the Great Recession, when its unemployment rate was among the highest in the nation and thousands of foreclosed homes choked the state’s housing market. Sample IRS Penalty Abatement Request Letter. Here is a sample letter to request IRS penalty abatement.

You can use this template as a guide to help you write a letter.

How to Write a Debt Negotiation Letter (with Pictures) - wikiHow