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Ellengrb

Unsecured Debt

12 posts in this topic

2 years ago, I bought a house with the intention of fixing it and selling it for a profit. I could not find  a traditional lender that would give me a short term loan while the home was listed so I unfortunately used a company that did give me a loan if I let them hold my primary residence as collateral. I did that, got the loan but the house did not sell for  years - during the majority of that time, I made monthly loan payments to the lender with a 19% interest rate since the loan term expired. Eventually the payments became too much and I let the house go "deed in lieu of foreclosure". As part of the aggreement, the lender had me sign an unsecured note to pay them 100.00  per month with a balloon payment at the end of 3 years. I felt like I HAD to sign this in fear of losing my primary residence and signed. I was scared to death of losing my home. I made 8 months worth of payments on time until all of sudden I stopped getting billed. I tried to call the lender and the number changed. The office location was gone and the chamber of commerce indicated that they went out of business. 18 months later I got a letter from a random company indicating that I should now make payments to them for the company that closed. Can they do this ? Is there a time limit on them having the right to collect ? Thanks

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I'd like to think you'd google "breach of contract statute of limitations" along with name of your state.  Almost certainly, the SOL has not run on this debt.  (Regardless of whether a given company goes out of business, it was foolish to expect that they'd not sell/transfer their assets elsewhere.  Just because you don't receive a bill doesn't mean you oughtn't have kept on sending payments.  If you spent that money, that's a problem, because you defaulted on the debt and hopefully the successor in interest won't exercise an acceleration clause.)

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Thanks,, I did keep sending the payments as they were set up to automatically be sent from my bank, They were returned to me. So I stopped sending them in and went through great lengths to find the company. 

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Also,there was no "acceleration clause" in the note.

 

It was probably not called that specifically. But the loan very likely has a provision in it that states if the loan defaults the lender may call the entire loan due immediately. That is what an acceleration provision does. It would be very unusual for any sophisticated lender not to include such a provision.

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It's not clear why "Fallen" "like to think" folks come here only as a last resort (and that folks know exactly how to phrase google searches for these sorts of issues).

 

 

As part of the aggreement, the lender had me sign an unsecured note to pay them 100.00  per month with a balloon payment at the end of 3 years. I felt like I HAD to sign this in fear of losing my primary residence and signed.

 

I think what you're saying is that you signed this unsecured note in exchange for the lender releasing the lien on your primary residence.  Is that right?  If so, you're lucky.

 

 

 

the chamber of commerce indicated that they went out of business.

 

Who are "they"?  By the way, I suspect a local "chamber of commerce" as a resource for this information?  Was the lender a corporation?  If so, did you run a search of your state's corporate records or anything of that sort?

 

 

 

18 months later I got a letter from a random company indicating that I should now make payments to them for the company that closed. Can they do this ?

 

Again, I'm not sure who "they" or "them" are.  Since "they" did this, it should be obvious that "they" can do it.

 

If your intent was to ask about the legality and/or propriety of this "random company" requesting payments on the note you executed in favor of your lender, that depends on whether the lender assigned the note to the "random company" or whether the "random company" otherwise succeeded to the lenders rights in the note.  I tend to think that most folks, when they receive a request from Company B that payments that were previously being made to Company A should now be made to Company B, would respond by inquiring of Company B why it believes the payments should now be made to it instead of Company A.  Did you make any such inquiry?  If so, what response, if any, did you receive?  Did the letter from the "random company" state that it is an assignee of or successor in interest to your lender?  Did it provide any documentation to backup such claim?

 

 

 

Is there a time limit on them having the right to collect ?

 

Yes.  The time depends on the applicable state law.  It may be the law of your unidentified state of residence, or it may be that your note specifies that a different state's laws govern the note.

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They probably can do it. Your debt to the first company was an asset that likely got sold when the first company went out of business.

 

The current company is now a successor creditor.

 

Your default on the note is likely well within the statute of limitations for a lawsuit and if your primary residence was still the security for the second promissory note or somehow tied to the first loan, your house could still be at risk.

 

I suggest that your first step be to send a written demand for proof that the current company actually owns the debt.

 

While you wait for that, do a public records search at your county recorder or land records office for any and all successive recorded documents starting with your original secured loan and see where that gets you.

 

Don't succumb to anything from fear. Get facts, evidence, and documents and then consult an attorney to review your options.

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Thanks Adjusterjack,, I checked with the recorder's office and there is no lien on my property. It was not used as security for the note. I know that for a fact. This loan was unsecured.  Thanks for the advice about making sure that the new company actually owns the debt. I will do that tomorrow. 

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Thanks Adjusterjack,, I checked with the recorder's office and there is no lien on my property. It was not used as security for the note. I know that for a fact. This loan was unsecured.  

 

How did that happen?

 

You originally wrote:

 

"I unfortunately used a company that did give me a loan if I let them hold my primary residence as collateral."

 

If your primary home was collateral it would have had to have been reflected in the recorded loan documents.

 

Are you sure you didn't miss something?

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They used my home for the first loan. When I let the house go "deed in lieu of Forclosure" they had me sign the deed documents as well as a note for 10,000.00 because they felt they were taking a loss and I should share that loss. Once I let the house go, the lien came off of my primary and the note was unsecured. I have a copy of the satisfaction and have called the courthouse.

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So the answer to can they do this is yes since they did it you know they can do it.  Whether they have the right to collect is a different issue.  It is possible that the original mortgage holder went out of business and sold your debt to this new company.  There are a couple of doctrines that would limit their ability to collect from you.

 

The first is the statute of limitations.  I don't know what jurisdiction you're in, but for example, in California the statute of limitations for bringing suit on a breach of contract claim is 4 years if the contract is written and 2 years if the contract is oral.  In Arizona it's 6 years if the contract is written and 3 years if the contract is oral.  I know of no jurisdiction where the statute of limitations to bring a breach of contract claim is less than 18 months.

 

The other option would be the equitable doctrine of laches.  Basically laches would require a showing that the debtors unreasonable delay hampered your ability to make a defense to a breach of contract claim.  Because this is an equitable limit instead of a statutory limit, you would have to actually go to court and the court would have to make this determination.

 

I believe that you are required to continue to pay under the contract regardless of whether you were billed by the debtor.  You would have breached when you neglected to continue to pay when they stopped billing you so this new company would likely be able to sue you for breach of contract as the successor in interest to the original debtor.  However, it seems like they are wanting to have you continue making the payments under the old contract, so you might consider talking to them about where you stand with them (since if I do the math right you are approximately 10 months from owing the balloon payment).

 

You might consider asking the new company to see the documents showing they are the successor on the loan before you start forking over money to them.

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Debts can be assigned.  Check your credit report and see if your non payment shows up there. 

 

Before you stop paying, talk to an attorney about demanding evidence of chain of title on the debt.  If a debt buyer cannot prove chain of title in court then they probably wont be able prove that you owe the debt to them at all.  And remember business records on their own are hearsay and need to be introduced by a custodian of those records (to say that these are records kept in the normal fashion) before they are admissible.  Do you think a debt buyer is going to have access to someone who can legitimately introduce those documents?  And if the debt gets cancelled before you default on it, then your credit rating should not take a hit.

 

There's a risk, though...if they CAN prove chain of title (meaning if they bring a witness), you will lose and they will probably accelerate the loan and make you pay it all right now...

 

it really all depends on what company bought that debt, and where you are bringing the case...talk to a local consumer rights attorney

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