What Do I Tell My Banker? I Don’t Want to Get Into Trouble. – Sharon

“Dear Steve,

In 2000-01, I found myself in conflict with my university (in NC where I live) on a policy matter that was never resolved and I had to leave the program. I was left with a lot of consumer debt, over time I have paid off in full or settled nearly all of the debts.

However, in 2001, just after I had to leave the university, one of the creditors (for a credit card) filed a judgement against me. It was never paid simply because at the time it was the largest of the debts, and I didn’t have the means. In 2005, I began a fulltime position in a surgical practice as a member of the staff (excellent benefits: health, dental, eye ins, 401k, rollover year to year healthcare savings account). In 2007, my family gave me the deed to my grandmother’s home with just over 3 acres. Its last county tax appraisal (2002) valu ed it at approx $68,000.

In spite of the economic downturn, this home sits in one of the fastest growing areas in NC and the US according to a recent national ranking. I do not yet know my home’s current market appraisal. My family and I have already put in approx $20,000 to improve the property grounds and the 2 outbuildings. I now need a construction loan to update the house (built around 1952 by my grandmother. I am her eldest grandchild.). My contractor states that $55,000 (approx 80% of its 2002 appraised value) should cover our budget.

I have a banker whom I met with yesterday who thinks this will be easy and quick since I own the property outright. He gave me the application to fill out and thinks all the bank work/closing can be done in 2 weeks or less.

How do I address the outstanding judgement on the construction loan application? I don’t want to omit it as that could hurt in terms of my trustworthiness. I did tell my banker that I hit a hard financial place 9-10 years ago and that I have been trying to take care of all and he appreciated that. As for the judgement, do I need to attempt to pay it at some point soon given that should I get the loan I will have the equity to do so (amount is approx $6000)?

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Dear Sharon,

If the judgment appears on your credit report then I would ask the banker if you can payoff the judgment as part of the refinancing. I would urge you to check your 3-in-1 consolidated credit report to see what each of the three major credit bureaus are reporting about that judgment.

The bank will probably run a credit check on you just as a regular course of business so you might as well look before they do. I strongly suspect this will all turn out just fine for you.

Please update me on your progress by The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Damon Day - Pro Debt Coach

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