Disclosing Home Equity to an Attorney Collecting Debt
I have just been served documents that I am being sued by a bank visa company. I have been unable to pay my visa cards for over half a year and have had many missed payments for 2 years before as I have had no ability to pay due to very low income. The only single asset I have is the property I own, which has quite a bit of equity in it - about 6 times more than the total debt I owe. I have been trying constantly but am unable to sell my house to access the equity to pay the debt.
Now that I am being sued, I am trying to settle with visa's lawyers for a lump sum amount that I can gather together from family which is about 65% of the total balance. The lawyer said that before visa will consider my settlement offer, they need me to fill out a document called a "financial statement" which asks me to list all of my assets and liabilities. I am worried that if I complete their request by filling in this financial statement document that they will see something they can't see through my credit bureau: that I have heaps of equity in the house, since it asks me to list the "current value" of the home, as well as the "current balance owed".
I fear that if I fill out this form they are likely refuse my offer, and go through with their current legal action, likely putting a lien on the house, I'd assume.
Would you advise me to fill out this form disclosing this information? If not, what alternative do I have to negotiate and convince them to settle without me completing this form?
Should I disclose my financial situation which reveals equity?
—Barry
Barry – I would really like to get some additional details from you before offering much more than general feedback about how your home equity may affect things going forward. I will start with my questions, and then give some generalities.
Who was the bank that issued you the credit card? Is that who is suing you, or is a debt buyer (someone who buys debts and the legal rights to collect)? Who is the law firm hired to sue? What state do you live in? What is the amount you are being sued for? What sources of income do you have (job, SSI etc)? What was the date you were served the lawsuit? Is your home equity more than what is exempted when filing chapter 7 bankruptcy in your state?
Until I know the answers to the above questions, I would not be able to give you my perspective and the feedback you deserve.
I will say that your general sense of things is accurate. Any information you give over is going to be looked at to determine if they should hold out for more money. There are sometimes ways to work around that by working with a family member, or a third party, without discussing home equity.
Debt collectors look at your credit report and can determine home equity.
Just so you know, if the home is mortgaged and on your credit report, they can see that. Debt collectors use sophisticated software in order to determine home values and target people to sue, or for higher workouts and settlements using this type of software. Even a less tech way to evaluate this would be to see the mortgage on the credit report and look up your property address on zillow and get a guestimate of your equity.
If the home is not mortgaged, they have access to public records and can often find property owned outright. I am bringing this up because they may already have a good understanding of the equity you have (not always though). There are ways to work with them knowing this kind of detail, but further feedback here will have to wait until my questions above are answered. You can answer the questions in a comment reply below and we can take it from there.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry, and is a regular contributor to several personal finance websites.
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