Bills Logo Team
UpdatedDec 13, 2010
Key Takeaways:
  • A short sale may or may not forgive a deficiency balance.
  • Credit reports a notorious for containing errors.
  • A debt charged-off is not forgiven.

I reached a settlement with Chase regarding a short sale. Now Chase and collection agents report it on my credit report. What can I do?

I have a letter from Chase following a short sale that states that my account was reported as settled. I have been contacted by a collection agency trying to get the balance. I checked my credit and one agency matches the letter from Chase and states it as "settled," but the other two state "charge-off." Can they still collect? I received no further correspondence after the settlement letter. How do I deal with the discrepancy?

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 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, 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.




SSteven, Mar, 2011
With regard to this, my short sale deficiency was sent to Oxford from Chase. My attorney has been in contact with Oxford and they told him that maybe Chase sent it in error as they have not been pursuing deficincies, so why mine? As this is going on (my atty conversation with Oxford), this morning, a company called PRS ran my credit report. I am not in arrears on anything. What could have happened here? Thank you.
BBill, Mar, 2011
I am not aware Chase ignores all deficiency balances as a company-wide policy, so I question the assumption that Chase does not pursue deficiency balances. Although it is possible for Chase to sell or assign your deficiency balance to a collection agent accidentally, I doubt it. Collection accounts do not just fall off the back of a truck or into a FedEx envelope at random.

Regarding the relationship between Oxford Management Services and Professional Recovery Services (PRS), I am not aware of any. Therefore, I cannot explain why PRS pulled your credit report.
TTammy, May, 2011
The same thing is happening to us. We completed our short sale back in July, 2010 and PRS contacted us in January, 2011 demanding payment on our HELOC from Chase. I sent a letter asking them to prove our debt to them and I just now in May received our original note from them. With no other documentation. I contacted an attorney who advised me to send another letter asking them to provide the "Chain of Assignment" from Chase to them. I have not done this yet, as I was going to wait until they were more aggressive with obtaining these funds from us. Since the 2nd mortgage was not "purchase money", it was due to a refinance in which we received cash out to update the kitchen which again we lost due to the short sale. We do not want to file BK, but may have to. Do you have any update on your transaction?
ssteven, May, 2011
Hi Tammy,Are you saying that PRS sent you the original loan documents to prove the indebtedness and also a copy of the note? Sorry, didn't understand.To date, PRS ran my credit 3 times and after my attorney sent them debt validation letter over 30 days ago, they never responded. He advised me to send them a letter demanding they remove the 3 hard inquiries or prove the note and to send copies to credit bureau.Also, my situation is a bit strange and something fishy as I had collection agencies contacting me even before Chase submitted a PMI claim, thus the Collection Agent could never be able to accurately prove the amount of the debt. PMI company told me they this is a first where I signed a PMI note and the lender is pursuing me for balance.