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We Defaulted On Our Real Estate Investment Property. What Can I Do? – Thomas

“Dear Steve,

I entered into a joint investment in a real estate home site in North Carolina in 2005 with a close friend. The investment totaled $119,000 and we put in about $ 15,000. each and financed with a local bank for a three years interest-only bearing loan. After three years, the real estate industry collapsed and we decided to default on the mortgage (November, 2009)The mortgage balance at that time was $ 93,400. and the economic downturn put me out of business — real estate marketing –so neither of us could afford to carry the loan. I am now semi-retired and the bank which inherited the loan after the primary bank merged into the second bank, has now suied me for the loan. My co-investor lives on the West Coast but they have not found him and therefore are seeking court action against me for payment, years after the loan was totally written off. After losing my business I had to refinance my home to pay off business-realated bank loans and have lost in excess of $ 200,000 since 2008.

We defaulted on the loan because we could no longer afford monthly payments and association and real estate taxes, and the value of the home site today is somewhere in the $ 10,000. range. I tried to get the bank to foreclose on the property and take it back via the Deed In Lieu of Foreclosure statute, but they would not do so because the property is worth less than 10% of the loan.

Are there any statutes in the Consumer Debt Protection Act or Truth in Lending Act, or any other consumers’ debt-related legislation which I need to know about to aid my defense re this situation?

Thomas”

Dear Thomas,

If you want to try and rely on a technicality you need to hire a lawyer that is licensed in your state to assist you to deal with this.

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If all the documentation is good then I don’t see any reason why the current debt owner can’t go after you even if the loan was “charged off.” That’s simply an accounting function.

A lender does not have to accept the title back and even if they do they can still go after you for money dues.

When you meet with the lawyer, you will want to review the statute of limitations and since your income may not be able to be garnished in North Carolina in some situations you will need some clarity on that as well.

Please post your responses and follow-up messages to me on this in the comments section below.

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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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