Before I answer your question about your Chase short sale, let us define short sale, debt settlement, and charge off.
Short Sale at a Glance
A short sale is where a mortgagee agrees to the sale of a property for less than the balance of the loan. The new owner is not liable for what is known as the “deficiency balance.”
A deficiency balance is the difference between the total unpaid balance of a mortgage (includes principal and all unpaid interest, penalties and legal or other fees) and the amount that the lender is able to recoup from the short sale (the sale price of the home, net real estate agent fees, unpaid property taxes, maintenance and other expenses).
In some instances, the mortgagee will write a contract whereby the former owner agrees to pay the deficiency balance. In other instances, the mortgagee will agree to forgive the deficiency.
One Bills.com reader reported the mortgagee agreed to forgive the deficiency if the reader’s financial situation remained the same. However, if the reader came into a windfall (winning the lottery, for example) the debt would be owed. A time limit was placed on this condition.
As you can see, making a broad statement about a former owner’s liability in a short sale is difficult given the inconsistent behavior of mortgagees.
A charge off does not mean the debt is forgiven. When a debtor stops paying on a debt, a creditor will attempt to contact the debtor on the telephone and via the mail. When the number of days since the most recent payment reaches 120-180 days, the account is no longer considered current and the creditor is required by generally accepted accounting principles to “write-off” or charge-off the debt. Writing-off a debt does not mean the debtor is no longer responsible for the debt, or that collection efforts cease.
Debt settlement is a process where debtors and creditors negotiate an agreement whereby the creditor will forgive a part of the debt balance. In law, this is called an accord and satisfaction. The debtor pays the new agreed-upon amount either in a lump-sum or over a structured period. The forgiven balance is considered taxable income by the IRS, although if the debtor is insolvent at the time of settlement this may be mitigated (seek advice from a tax advisor on Cancellation of Debt Income, and be sure to ask about Form 182). The settlement is noted on a credit report typically.
Credit Report Accuracy
The information contained in a credit report is an imperfect snapshot of a consumer’s financial life from 60 to 90 days ago. In fact, credit reports are notoriously inaccurate. The General Accounting Office reports that of the 52 million free credit reports requested of the credit reporting agencies (commonly called "credit bureaus") through AnnualCreditReport.com, 25% of those reports resulted in a dispute. Of those disputes, only 25% were verified as accurate. According to a 2004 Federal Reserve Board report, 79 percent of credit reports may contain some type of error and that about 25 percent of all consumer credit reports may contain errors that can result in the denial of access to credit.
The Fair Credit Reporting Act (FCRA), a federal law, requires consumer credit reporting companies to report accurate information. If you find any inaccurate information in your credit report, you should dispute the credit report listing with the credit reporting agency in question to fix your credit report. There is no cost to disputing a credit report item, other than the time it takes to assemble the evidence, write the letter(s), and buy postage stamp(s).
Chase Short Sale
If, as you mentioned in your message, you reached a settlement with Chase regarding your short sale, then you do not owe Chase or anyone else anything for the deficiency balance. If there was no settlement regarding the deficiency balance, then Chase or a third party Chase sells your collection account to may have the right to collect the deficiency balance from you.
Bring your settlement agreement and short sale documents to an attorney in your state who can review them in person. Perhaps there was no accord and satisfaction with Chase. Perhaps Chase mistakenly sold your deficiency balance to a collection agent. The facts in your message do not add up, and without reading your short sale contract I cannot account for the discrepancy described.
I hope this information helps you Find. Learn & Save.