This sounds like a pretty standard settlement. If you filed a Chapter 13 & lienstripped the 2nd, they would receive nothing.
As long as the settlement offer is in writing, there shouldn't be anything shady about this plan. Take it to a local lawyer if you need someone to stand in as an escrow.
Hope this perspective helps!
Yes, read the fine print and take it to a consumer lawyer to be safe. Make sure they do not re-obligate you to the loan amount before settling it for $6900. If your second mortgage is a loan which you entered into after you purchased your home (such as a HELOC loan), settling it will be considered income by the IRS. You do not want to get a 1099 for $63,100.
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I disagree with Mr. Basmaji. They cannot reobligate you on a discharged debt. They cannot even collect on it. However, they can exercise their rights under the lien. Get the agreement in writing and signed. Then, take it. That is a good offer.
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