WatchWe are getting ready to strategically default on our condo. We bought it at the market peak in 2007. We have tried refinancing, modifications, etc, but got declined for everything. I don't believe market will turn around any time soon for us to recoup our (sizable) loses.
Please post here about the delaying tactics that can help "home owners" stay in their houses rent-free for as long as possible after the default.
If you don't feel comfortable posting your delaying tactics, please feel free to private mail me.
(I know some people consider strategic defaults immoral/illegal/bad for the community, etc. I am not proud of what we are about to do, but this is purely a personal financial decision. We simply cannot afford to keep paying for our house.)
Thanks in advance! :)
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iwog says
This is a repeat of the same nutty idea you've had in the past. Kind of like just shoveling out money from a Helicopter, right Ben? What happens to the value of money due to this highly inflationary monetary policy is one of those funny unintended consequences that just keeps getting in the way. The fact that inflation always penalizes those that have their hard earned savings and investments denominated in U.S. dollars is a funny little thing the hyper Keynesians never seem to care about.
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klarek says
That is a solution to our economy's problems. It was certainly a solution when hyperinflation wiped out every last penny of debt within Wiemar Germany, and 10 years later they were a world superpower with a massive industrial economy trying to take over the world.
I'm not advocating hyperinflation or the default of all debt within the United States, however a little goes a long way. A devaluation of 25-50% subsidized by the printing press would do wonders and wouldn't make rich people destitute.
Remember I didn't say "What if Bill Gates gave away all his money", I only said $10 billion. Likewise a 50% devaluation will still leave plenty of rich people in America while at the same time it will raise the standard of living for all AND create a vibrant economy with lots of jobs.
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RayAmerica says
I'm no longer going to entertain thoughts of hyperinflation during a time when both inflation and interest rates are at the lowest point since the Great Depression.
Right now we could certainly use some inflation.
As for "hard earned savings" it's an oxymoron most of the time. In my experience most savings are neither hard earned nor are they savings. For every Warren Buffett, there are a dozen Paris Hilton's who don't contribute a damn thing to society and simply got themselves born lucky.
It's a dirty nasty little secret within the aristocracy, but it's true. MOST money is old money. Keeping the illusion of the self-made millionaire is simply a way to keep the masses pacified while the aristocracy rapes the peons.
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TechGromit says
Our office doesn't handle Chapter 12 bankruptcy, but it's a chapter reserved for farmers and fishermen.
I think you may be thinking of Chapter 13. A Chapter 13 can delay foreclosure indefinitely however the mortgage payment must be kept current. A relief from stay motion is generally filed very quickly after the money stops.
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iwog says
Psst Iwog brace your self, poor people don't have money, they aren't STUPID.
For the most part.
Most families in America look at Credit, and Income left over after paying bills as "Disposable" income. How ever, if happen across a considerable chunk of cash, most will opt to sit on it, and then try to grow a nest egg.
What's that adage, "Money attracts money" it's actually Human Nature rather than rules of money. The bigger chunk of money poor people have the more conservative they will become.
An example some poor schmuck walking out of paying his FP&L bill, gets accousted by a guy selling a dead ringer Rolex knock off watch. The guy leaving the billing station only has 75 bucks left over to carry him over to the next pay period. He is easier to be persuaded to make that impulse purchase than the same guy a week later, after coming into Some cash.
When has nothing he has nothing to lose, and buying that watch how ever little he could afford it that week. Will temporarily give him an escape from his money plight. It wouldn't be the first time he had to go ask for pay day advances.
Now having cash, he suddenly has options, he is more selective on how they spend it. So they decide to not become consumers with the cash. How ever their existing Vices are stronger than their consumer impulses. Although they tell them selves just this one time, they will drink and drug the money away if they aren't prudent with out drug or alcohol problems.
This is why stimulus does not work, it only takes money from one person and transfers it over to another, who either may or may not use it in the business verticals the stimulus targeted.
Surely the intention wasn't to raise alcohol consumption or give people money to sock away for a rainy day, or until they save enough for their ambitions.
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Correct. Poor people don't have money, that's why the government needs to take steps to ensure working Americans get a piece of the action when they create wealth.
The government hasn't been doing this since Reagan.
Proper stimulus like during the New Deal or during World War II gives Joe-6-pack a job and then pays him for it. Some of Obama's stimulus money did exactly that however there hasn't been enough.
What we really need is a return to progressive taxation in this country, a raise in the minimum wage reflecting the modern cost of living, and an expansion of the money supply going to workers and NOT banks. Stimulus does work as long as it's a transfer of money from a non-spending and non-productive member of society to a spending/productive member. It also works if the money comes from China.
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Thank you for all the relevant posts to the topic of this thread.
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iwog says
Absolutely by creating opportunities, not by entitlement checks. Nobody is entitled to money they didn't earn.
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iwog says
I agree with what you are saying in principal but in theory a "Minimum Wage" to reflect a minimum lifestyle or living standard in this day and age. Is driven more by consumerism and for purpose of spurring consumer goods and not necessities.
The minimum wage was never about a standard of living, it was about being able to at least eat.
That's why it was always so low, no body never paid the rent on Minimum wage, and certainly hope they don't buy big screen T.V.'s on minimum wage, when they've got kids to feed.
What would you say is an acceptable "Minimum Wage"?
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iwog says
Here we go again. Iwog again praising Adolf Hitler's "world superpower with a massive industrial economy...." What the little duckie dude fails to mention is that Hitler also practiced Keynesian economics. His economic policies could not be sustained over the long term and he knew it. That is precisely the reason he fired his Minister of Economics, Hjalmar Schacht. The reason? Schacht emphatically informed Hitler these Keynesian policies could not be sustained. Hitler replaced him with another fanatical Nazi that he knew would follow orders; Hermann Goering. Had Hitler not started WW 2, Germany's economy would have collapsed like a house of cards. One of Hitler's primary goals in invading eastern European nations was so that he could loot those nations’ treasuries. Keynesian economic policies does have unintended consequences and history proves it. Continually pouring fiat money into an economy is a tactic that cannot be sustained. Eventually, the day of reckoning arrives and the economy collapses. Precisely what is happening right now all over the world.
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iwog says
That is, take from the haves and give to the have nots .... by FORCE.
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Tenouncetrout says
If Minimum Wage is a valid concept, why not make it (FORCE employers to pay) $50 an hour?
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RayAmerica says
No stupid, let the workers keep a decent share of the wealth they create through a minimum wage and progressive taxation.
I find your view of the world to be vile and twisted. You're so full of hate it bleeds out into everything you write.
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IANAL - maybe someone here is.
We are talking strategic default. In other words, the OP can pay the mortgage, but chooses not to.
In that case, is bankruptcy even an option? If they have sufficient assets to pay their loan, how could they be bankrupt?
I know nothing about bankruptcy... but it seems to me that applying it to a "strategic" default would be difficult - its not as if a hardship (job loss, illness, etc.) threw the OP into a financial state whereby their debts are larger than their capacity to repay them.
IWOG - isn't this your area of expertise?
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Yes bankruptcy is still an option. Anyone who doesn't owe over $1 million can file a Chapter 13. It involves a 3 year debt repayment plan, but after that you're free.
The other benefit is that a chapter 13 is only on your credit for 7 years instead of 10.
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Not to get too far off topic, but is it true that student loans are exempt from Chapter 13 proceedings? Just curious.
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EastCoastBubbleBoy says
Yes. Thanks to our good friends the Republicans, student loans cannot be discharged in bankruptcy except under extreme hardship. (loss of limbs, radical disability, etc.) The old rule was 8 years. The only way most people can get rid of a student loan is to wait the statute of limitations. It's 25 years.
It's pretty damn close to indentured servitude if that high paying professional job doesn't materialize after school.
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If you mean claw back a few pounds of flesh from the takers, then what's the fuss? A little cut and thrust with the pitchfork seems cosmically overdue.
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No wonder Iwog is so sure of an economic recovery - there's certainly one in his business (bankruptcy)!
From the American Bankruptcy Institute: July Consumer Bankruptcy Filings up 9 Percent from last Month, Year
The 137,698 consumer bankruptcies filed in July represented a 9 percent increase nationwide over the 126,434 filings recorded in July 2009, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). NBKRC’s data also showed that the July consumer filings represented a 9 percent increase from the 126,270 consumer filings recorded in June 2010. Chapter 13 filings constituted 28 percent of all consumer cases in July, a slight increase from June.
Now, Iwog, let me get this straight. These same deadbeat losers are now going to turn right around and DRIVE the economy back into growth?
ROTFLOL!
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schmitz_kris says
Sounds like a plan to me! ROFL !!!!!!
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Iwog the Economist: "Let's GIVE everyone in the USA $10,000 in cash. That will turn around the economy."
I kid you not. On another thread, this is exactly what the Duckie Dude proposed. I take that back, he ammended that amount later on to $25,000!! Yipeeeee!
Move over Helicoptor Ben, you're in the way of the Helicoptor Duckie Dude! "Look out below!! Here comes the CASH!!!"
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But you see if everyone were to get $25k in cash, they'd use it as a downpayment for a $100k car that they were unable to repay in the first place. Irresponsible consumers will be irresponsible consumers. but I guess since they spent the $25k, it is some what driving the economy.
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Vain says
See I didn't see Iwog's supposed post on giving everyone $25k, but anyway it won't work. I would just sock it away in my IRA or brokerage and move on. There are many others like me, I believe. I have not lost faith in America. Lee-bahr-tee!
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iwog says
If you could discharge student loans through bankruptcy, why would anyone pay back their loans. Most recent grads have no real assets and most likely won't want to buy a house for a few years so why not just wipe out your debt. If you default on your home loan they take your house. If you default on your school loan, they can't take your education away. It makes complete sense that people honor these debts.
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fil says
You're basically making the case for indentured servitude. Not everyone who makes it through law school becomes an attorney. Not everyone who does 4 years in undergrad and 2 years in Med school become a doctor.
If they make it, fine and dandy. If they don't make it, you really think their earnings for the next 25 years should go to Citibank? There has been a lot of blood shed over getting rid of debtor's prison and indentured servitude. It's the type of oppression that causes wars and revolution.
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iwog says
No one forces anyone to purchase a college education. People need to think about their finances before taking on debt of any kind. I'm all for putting a cap on the interest and fees and such, but I think if you buy something you should pay for it.
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fil says
Okay, I've never looked at it that way.
iwog says
I'm not so sure it's a republican thing... I do agree that it's indentured servitude, tho. The definition of hardship should be changed. People don't purposely get an education and then bomb at getting a job that pays well. Some professions don't pay much, and yet they require a college education. And some professions have gone away... like a secretarial school or print photography or typesetting...
25 years is a long time to have bad credit 'cause your profession didn't pan out. Just sayin.'
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fil says
People borrow money based on hopes and dreams. If a person goes into debt $200,000 and doesn't make it through medical school although he/she had the most sincere intent, do you think that should be punished?
It seems to me that the money lenders want it both ways. "Yes you can borrow money with the hopes of becoming a doctor" and "If you don't become a doctor, you're screwed and we own your wages for the next 25 years"
Business doesn't work like that so why should personal finance? If the risk is removed, how come Citibank is still allowed to charge interest lending out the fed's money? What does that interest pay for anyway? A bunch of deadbeats who sit in private offices and devise ways to get young people into more debt??
The whole system is rancid to the core and I will NEVER take the side of lenders.
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iwog says
Right. When the kids come home high on meth or ecstasy or whatever, the RIGHT thing to do is PUNISH the dealer(s) who sold it to them.
Eyes roll.
Iwog, have you ever heard of personal responsibility? What about dealing with the consequences of your own actions?
ADULTS are not just kids who also happen to be 18 (or 21 or whatever). Being an ADULT means that you realize and acknolwedge your decisions and actions have consequences and that you will bear the consequences of those actions/decisions. Being an adult means you are RESPONSIBLE and agree to be held accountable for what you do and that you don't just whine and go hide when things don't go your way (behavior of little kids).
Forgiving the adults while going after "those bad men out in the neighborhood" is NOT the way to address the rancidity! You're right that many of these lenders were/are scum, but they only do what they do because there's a market for such filth.
You need to teach/show these adults that what they did was STUPID, and the best way to do that is through pain. Pain and suffering have purpose, you know - they teach you what NOT to do.
Who is more likely to stay away from drugs in the future? The kid who got sent to bed while his parents blamed the party, his friends, the dealers, etc. or the one who broke his arm and a couple of ribs falling off a balcony because he thought he could fly?
If you suffer from bad behavior it increases the odds you won't repeat it.
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schmitz_kris says
Which actions are you talking about? The working stiff who DARES to think he might be able to afford a home for his wife and children? The hopeful college student who DARES think that she can become a doctor someday? (but doesn't realize that 2 years into the future she's going to be hit by a car and drop out of school)
Oh yeah, JUST like someone buying drugs.
Do you know what I think about personal responsibility? I think it's a wonderful thing and I think that the huge majority of borrowers are sincere about paying back their loans.
However the nature of a money loan is a bet. It's a gamble on both sides. The lender is betting that the student finishes school and can pay off the loan. The borrower is betting that her new job is sufficient to make the payments. The risk is the ONLY justification for charging interest!!!!!! Why else do you think a bank is justified in creating money out of thin air yet able to make a profit on it? It's the RISK they take which makes it a legitimate business.
Once you remove the risk of default, a bank is no longer providing a service of any kind and is guilty of an immoral act. Not just the collection activities, but making the loan itself is an immoral act! Why??? Because they provide NOTHING! They create money out of thin air, lend it at interest without the slightest chance they will get stiffed, and rake in the profits!
It's the ultimate perversion of our society that people like yourself think this is fine and dandy, and that the BORROWER is no more than a junkie trying to score a fix.
Now here this and hear it well. You push the working class too much harder, and you're going to have blood in the streets. It has happened over and over and over and over again in history. People who preach the legitimacy of charging interest and building debtors prisons have often discovered that their heads had been cut off and impaled on a spike in the town square.
I'm not sure what cancer has infected Americans where they think a corporation stealing is okay, but a pissed off population has consequences. It is now legal for a corporation to charge 800% interest and no one even goes to jail! How much longer this will last will be measured by how much more "responsibility" is forced on people who don't want it. Stay tuned!
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ROTFLOL!
"The working stiff who dares..." What a load of horse manure! He/she could've just easily rented a place to live. He could've moved to a cheaper location, etc. The possibilities are endless. Tell the truth, Iwog! 90%+ of those poor souls who were "taken advantage of" by the big, bad banks WERE BETTING that their real estate would appreciate, and now that their bet has gone bad, they are being the babies/wimps/SPOILED CHILDREN that they are and are defaulting in record numbers. They're WORSE than drug addicts because, although addicts may steal to get money for drugs, these losers TAKE OUT LOANS for their fix (easy money to get what they want when they want it and how they want it) which puts the entire financial system at risk.
President Bush even FORGAVE THEM the federal tax implications of their forgiven debt, or did you forget about that piece of legislation?
14% of the population with a mortgage is not paying the mortgage YET the banks take FOREVER to kick them out of their homes. Gee, wouldn't everyone love to have 2 years or more of free rent?!? These people are CRIMINALS and should go to jail - the homedebtors I mean, as they are stealing a temporary residence.
You sound just like those ads on TV - "in credit card debt, got too many bills, call XXX and we'll make your problems disappear!"
DISGUSTING! tHEIR STUPIDITY AND GREED AND IRRESPONSIBILITY PUT THEM IN THEIR PLACE, AND NOW THEY CRY LIKE BABIES TO GET OUT OF IT.
Oh, cry a river for those poor souls indeed.
Puke.
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The cost of a college has gone up commensurate with available financing. Only the very wealthy can afford to pay cash. The schools push the loans because they support the tuition. The loans are presented to inexperienced young people as reasonable financial products.
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schmitz_kris says
Wanting a house to live in or an education to become a productive member of society is very greedy and unreasonable.
I stand corrected.
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But what about the professions that don't pay huge amounts but require degrees? Teachers need a minimum of 4 years, as do Social Workers... and we don't get paid a helluva lot. I know some people who are finally paying off their loans and they're nearly 50 years old.
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"The economy is exactly the same way. Once the working classes attain enough debt to prevent new purchases, they are out of the game. Free the working classes from their debt, and they are once again consumers."
... sounds like Tyler Durden had it right at the end of Fight Club: "If you erase the debt record, everyone goes back to zero."
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schmitz_kris says
Talk about cry me a river. The banks loaned them the money--knowing that if house prices fell, then they might default. This is not the first time this has ever happened. The banks loaned the money with zero down, negative ARM, no income verification. The banks were, in effect, making the same bet that real estate would appreciate...
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tatupu70 says
Really? When has this happened?
When we were drawing plans for TARP and the banks were having to estimate their losses based on bad loans (NINJA, ARM), where in there did they account for deadbeats with perfectly fine mortgages that would default out of choice?
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klarek says
Who's talking about TARP?
If banks didn't account for the possibility that people might default if home prices went down, then they deserve to lose money. That's why smart lenders demand a sizeable down payment--to make the purchaser have skin in the game.
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elliemae says
Aren't there programs for teachers that can get rid of some or all of your loans? Teaching in inner cities maybe? Also do you need $200,000 in loans to get a degree. Not everyone needs to go to the most expensive schools.
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iwog says
A better and more fair way to have "free" education is to have everyone pitch and and everyone enjoy the benefit. That isn't what it is like here obviously, but in Holland a college education if pretty much free. Of course they have really high taxes, but this is better than your scenario where some people pay and some default. I know people who finished law school only to decide being a lawyer wasn't for them. They didn't get the high paying lawyer jobs they dreamed of, but they are paying their debts. So maybe they have to put off buying that fancy new car, large screen TV or granite counter tops. Even if you don't make it as a doctor or lawyer you can still get a decent job and pay your debts. If you truly have extreme hardships then debt forgiveness should be considered, but otherwise why should some people get a free education while others are paying off loans and struggling.