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Mark Cappel
UpdatedFeb 19, 2010
Key Takeaways:
  • Understand that an account that is charged-off does not mean the debt may not be collected later.
  • Negotiate with your lenders, to avoid foreclosure.

I have not paid my mortgage in 9 months -- no foreclosure yet. I am getting calls from a collection agent. What are my rights?

I am over nine months behind on a mortgaged rental property due to tenants failing to pay their rent. I owe $200,000. I was expecting the property to be foreclosed on as this is the first and only mortgage, but Chase has opted to charge-off the debt. I am very confused by this. Now I am receiving calls from a collections agency. I live in New York and the property is in MA. I cannot afford to pay the balance. What options do I have? Can I be sued or my wages be garnished? Also what happens to the property which is now vacant? Lastly, what state guidelines should I follow, MA or NY?

A mortgage is a written pledge of property used as security for the repayment of a loan. The property you purchase is the collateral for the mortgage. If you fail to make payments on the loan, the lender can repossess your home. As a result, the lender has some legal rights on your property as you pay off your mortgage.

Unlike a standard loan, the mortgage is used to enforce the lenders rights to the property if the borrower does not repay the home loan. If the borrower does not keep up with his/her monthly mortgage payments, the borrower can obtain the home through what is called foreclosure.

Foreclosure is the forced sale of a home or property that is pledged as security against a mortgage. The property is sold so the lender can recoup its losses on the loan.

There are two types of foreclosure: judicial and non-judicial foreclosure. A judicial foreclosure basically means that the foreclosure is a court-ordered legal process. New York is a judicial foreclosure state. A nonjudicial foreclosure happens outside of court. Massachusetts is a nonjudicial foreclosure state. (More on this in a moment.)


I sense you may not fully understand what "charge-off" means. To understand the concepts of charge-off and why this term and event means almost nothing to debtors, see the resource Charge-Off & Credit Report.

Contact Chase to learn if it sold your account to a collection agent, or if the collection agent is working on behalf of Chase. Foreclosure is expensive, and Chase has the option to assign your account if it so chooses. Can Chase or the collection agent get a judgment (which is a necessary first step to getting a garnishment or levy) without foreclosing? Generally speaking, no. However, I hasten to add that this right is set in state law, and no two states have identical property or remedies laws.

Conflict of laws

Regarding the choice of laws question, that is highly fact-specific, and I am reluctant to offer an observation on this subject. Generally speaking, the foreclosure would be subject to Massachusetts collections law. Collections, however, would be governed by New York law. However, as I mentioned, your question is fact-specific, and therefore I urge you to consult with a New York attorney to get a more precise answer regarding your rights vis-a-vis the collection agent.

See Collections Advice to learn more about your rights as a debtor.

I hope this information helps you Find. Learn & Save.




JJaime, Dec, 2011
Hello, I have a home in California purchased in February 2004,in December 2007 I moved to Puerto Rico due to a job transfer. My first mortgage is with Bank Of America (145,000) and a home line of credit with Chase (175,000). I rented the property but the rent did not cover the entire mortgage payment, so I had to come up with an extra $600 every month. I paid on time during three 1/2 years the first and second (interest only to afford the pymt). Six months ago I stop making the payments since I could not longer afford it, before doing that I called the banks but neither one wanted to adjust rates because I was current. Today I found out while checking by credit report that Chase charged off the line of credit. At the present time I am working with a realtor to shortsale the house for $170,000. I have not purchased a home in PR, I am renting. What are my options?Thank you
BBill, Jan, 2012
You will need to work with the lenders if you wish to proceed with a short sale. If the lenders do not agree to this, then it is most likely that they will proceed to foreclose on the property. Any deficiency balance is likely to be pursued by the lender through a lawsuit. If the creditor obtains a court judgment, this can lead to wage garnishments, bank levies, and liens on your personal property. Since you are dealing with a large sum of money, you can assume that the lender will aggressively pursue the debt.

Your first course of action should be to negotiate a short sale with the lenders and a debt settlement on the deficiency balance. Read the article about debt relief to learn about different options available, including debt settlement and bankruptcy.