Settlement Offer Received on 2nd Mortgages - What are my choices in TX

Although it is true that wage garnishment is not possible in Texas, the creditor can bring judgment against you to garnish your bank account.
I think settling the debt for $18K is a good offer. However, before paying off the debt, you should get the settlement agreement in writing.

Thanks Novice, the settlement agreement states that the amount agreed will be accepted as "full settlement with no recourse by either me or the collection agency". Whats worse is having to get 1099s for roughly 158K. I think I may be able to claim insolvency next year but I'll just have to address that when I get the 1099s next tax season. I didn't think my bank account could get garnished but a lawyer told me the same thing last night. I can't wait to get all this behind me.

Hmmm...I thought second mortgages were'nt allowed in Texas. I thought you could only have one mortgage on a property.

Where'd you hear that from?

I'm a nationwide loan officer. It's in the Texas lending guidelines. It's also a rule listed with Texas Savings and Mortgage regulations. It's not a lenders rule but a rule that is regulated by the DFI in Texas.

sorry...that was me that posted as the guest above. I forgot to sign in.

I just emailed the TX Savings and Mortgage Dept and will await a response. I don't know if anything can be done at this point but it won't hurt to inquire before I fork over the 18K. Thanks

Ok, I just called the consumer hotline of the TX Savings and M Dept and they said that 2nd home mortgages are allowed in the state of TX. This is the number Consumer Complaint Hotline: 1-877-276-5550. Thanks for the feedback though!

Hmm....Thanks for that info. I am now really confused. I have been in the mortgage industry for 10 years now. Texas has very strict laws regarding the mortgage industry and always has. I'll need to call the person back that gave me that info at the Texas Savings and Mortgage department and have them explain it to me again. I might have misunderstood.

The restriction on 2nd mortgages in Texas is limited to your primary residence not investment property.

Aha! Thanks for the clarification.

Hi CSS
You need to file form 1099C and pay the tax on the amount of debt that has been exempted. If you do not pay the tax, the IRS may not only garnish your bank account, but also garnish your wage, even if you are in Texas. As far as I know, to garnish your wages, the IRS is not required to bring judgment against you.

you are correct novice.anything over 600.00 forgiven must be filed with a 1099C.the IRS doesn't need a judgement to garnish or levy on delinquent taxes.

Thanks Novice and paulmergel, yea I know about the 1099C...I guess there's one advantage to having so much debt and that is I'll most probably be able to claim insolvency due to my debt will be more than my assets. Thanks for all who commented, this was/is very helpful.

Ickity tax time :cry:

Hi CCP
Even if you have debts more than your assets, you will not be able to file Chapter 7 bankruptcy if you have sufficient income to pay off the debts in a 3 to 4 year period. In such cases you may qualify for Chapter 13 bankruptcy. However, if you can settle the debt for 18K, I think it will be better, but before making the payment, you should ask them to send the settlement agreement in writing.