August 8, 2018


By Timothy Stull (



Defaulted second mortgages are wreaking havoc for many home owners.  Collection agencies and collection law firms have serious interests in collecting on this debt.  The profit margins are high and the collection tools that can be used are vast.  This debt that once was considered undesirable, is now the hot ticket in the collection market.  Rising property values and a booming economy have propped the door open for collection opportunity.  Keep in mind that this is really old and dirty debt though…primarily left over from the great recession.   We recently settled a 92K debt for 8K on one of our client’s default second mortgage debts.  There was 250K equity in the property and the client has a six figure income.  How did we do it?  Listed below are the levels we used to attack from.

  1. Lack of valid accounting records.  Since this debt is so old, most of the accounting records do not exist.  The collection agencies will usually try and fabricate documents to fill the gaps in the records.  We can pick apart the phony records, which leaves violations per the FDCPA.  The FDCPA violations and fraud are used as leverage to negotiate.
  2. Lack of debt validity. All of these debts have been bought and sold on many occasions….many of the firms that once owned them are bankrupt.  In short, nobody really knows who owns this debt.  Since the debt was so undesirable for a long period of time, critical records just vanished.  Valid notes, deeds of trust, affidavits and allonges don’t exist.  These documents are required to prove up the validity of the debt.
  3. Post-Bankruptcy collection violations on discharged debt. While this activity does not apply to all cases, this is a very controversial issue in the market.  Collection agencies / attorneys will send out statements to make it appear that the discharged debt is still owed.  However, the debt has been discharged and only the lien survives.  Many people are tricked into making payments that they are not liable for.  Any statements that are sent by a bill collector must be free of influence to collect funds…this is where the violations are found.  The bottom line is that it is a violation of the Federal Bankruptcy Code to collect money on a discharged debt.

Feel free to call our office at 877.297.7011 or email if you need help with a similar case.

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