Refinancing Mortgage and Need to Settle Property Lien Debts
We decided to refinance our home and during the process discovered that my husband has four judgments, liens on our property. Needless to say, we can't do anything until we settle it to have it removed. The collection lawyers are being very uncooperative and refusing to accept any offers we make, they're willing to cut $3k of the top (on the lien the amount equals to $11,367.95) but they're stating that the total owned is actually $13,371.23. We offered .30 on the dollar.
Am I better off paying a lawyer to negotiate with them now that the judgement have been granted since they're refusing to meet us half way? They say that their client would almost prefer us not to settle right now because they will be accruing interest over the years ($1,600/yr) at 12%.
I would be better able to provide you the feedback you are looking for about settling a property lien if you answer the following questions:
What state do you live in?
Who were the original creditors these debts were owed to? And were the collection suits filed in the name of the original creditor, or a debt buyer? If a debt buyer, what are their names?
How long ago were the judgments entered in the court?
Did you mention at anytime that you are trying to refinance?
Settling your debt when there are liens on property is not always going to be straight forward.
There are many situations where you would be able to settle unpaid debts for 30%. But in the last stage of collection you are in, where there are judgments and liens, 30% settlements are just not that common. Here are some reasons why settling property lien debts settle at higher rates:
A judgment creditor can use current trends in your local home market to determine your home’s value. Your credit report generally shows your mortgage debt (first, second mortgage, HELOC), and the balances still owed on them. Because judgment liens have to be cleared up eventually, in order to pass on clear title to a purchaser, or when refinancing, they can make a fairly good guess at whether they should hold out to get paid more. This may be the precise reason why you heard the attorney say the client would be better off holding out.
What is the current estimated value of your home?
What amount do you still owe on your mortgage (including a second and HELOC)?
You will often be settling debts that resulted in a property lien with an attorney debt collector. Generally, debts are settled with attorney collectors at a higher percentage than when settling debt with a typical collection agency. This is certainly not always going to be the case. I have worked several files and settled property lien judgment debt for very favorable savings, even as low as 30%. These instances are fewer though, and situational. I would need to learn a lot more from you about your personal situation.
There are other details that debt collectors, attorney or otherwise, will use to determine what amounts to settle for. Real time access to your credit report means the ability to see what debts you are current on, or that remain unpaid. Sometimes these collection shops subscribe to software the takes a whole host of information and spits out a collect-ability score. The collector may use that scoring to set a floor for what they will accept as a settlement. You can often get them to budge over time, but if you are trying to push a refinance through, your time may be limited.
Watch this video interview I did with a former debt collector about negotiating debts before buying or selling your home.
Hiring a lawyer to negotiate your debt.
There are very good reasons to hire an attorney when you are dealing with debt collectors, and especially collection attorneys. When it comes to hiring an attorney to simply negotiate and document a settlement, it may not be necessary to go to the expense.
Using attorney debt settlement services if there are legal maneuvers to make in order to resolve your debts more favorably, can make the cost of hiring an attorney worth it. There are also instances where the cost of the settlement the attorney negotiates, combined with the attorneys fees, are about what you would have gotten without the attorney.
I am not sure what you have done to date with your own negotiation efforts, but answering my above questions in a comment reply, could help me to give more specific feedback.
Depending on your answers, I may also encourage you to call in for a free consult.
Any readers with questions or concerns about settling a property lien can post in the comments for feedback. You can speak with me directly by calling 800-939-8357, option 2 rings directly to me.
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