Sunday, November 4, 2012

Got Questions? Get Answers... JSW is Concerned About His Future Finances So He Can Protect His Family

Got Questions?

Hi, I bought my current home in August, 2001. I have made each and every payment on-time the entire time I have owned the home. I have exceptional credit (850 FICO). I have tried to sell the home 3 times. At present, it is listed for sale. I have it listed $7,000 below what I owe on the mortgage and I have no takers. Sadly, it backs to a busy road and has a small backyard. However, it is well taken care of -- almost new -- and considerably upgraded. I just can't seem to sell it. I don't even think I could get someone to buy it even at $200K. And now, it looks like Romney is going to win the election and repeal the mortgage interest deduction. I currently take $35,000 in deductions just in mortgage interest alone. Even with his so-called cuts, it will be a huge tax increase for me. I can't afford it. I'm already supporting my parents and my brother who is currently out of work.

I would like to strategically default on the property, but I don't know if that is the best option. What would be your advice? I think I am too far off the mark for a short sale since I don't think it would sell even at $200K. It is sad because the home is in a very nice affluent community where the average incomes are over $100,000 annually. And, I don't think the bank is going to work with me at all in taking back a property that is clearly worth much less than I owe on it. I feel I got the short end of the stick and that it isn't going to get any better unless I do something. Even trying to sell it at a loss, I'd be clearing my 401K to do so and no one will step up and buy it.

What do you think? Is strategic default the right option for me?

Kind regards,



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Monday, October 15, 2012

Strategic Default Best Practices: Consider The Tax Implications

In this article we will explore how to properly analyze a strategic default in connection with any potential tax liability. This is the first article in our new series: Strategic Default Best Practices

Many homeowners who have strategically defaulted now recognize it can several years for a lender to collect a debt or to foreclose on a property. In fact, many homeowners continue to live in and/or rent their property while strategically defaulting.

It stands to reason that a homeowner who strategically defaults intends to be in a better financial position.  The homeowner has not made mortgage payments for several years while living in and/or while renting part or all their property. What a paradox?  By not making mortgage payments a homeowner can potentially improve their financial profile. In fact a properly implemented strategic default can create a better financial future for you, your family, or your business. Keep in mind that maintaining a good credit score is not possible when implementing a strategic default. Thus a “credit score" is not an important financial consideration during a strategic default. The primary goals of a strategic default are to protect and increase cash flow, to protect and increase savings, and to protect and preserve wealth/assets; all with the aim of reducing or eliminating the total debt and/or any tax. 

There is no free ride when it comes to not paying a debt. In our book, Strategic Default: How To Create A Better Financial Future for You, Your Family, or Your Business we outlined the principle "Debt Is Similar to the Physics Principle of Matter and Energy". There is a principle in physics that matter and energy can neither be created nor destroyed; they can only be rearranged. Debt follows the same lines. Once debt is created it cannot be destroyed unless it is restructured and resolved. Therefore, if a debt is not settled or resolved, then the debt will remain as long as the creditors are legally allowed to chase you for it. For example, a money judgment can last for 20 years in New York. Original lenders and 3rd party debt collectors will always attempt to collect unpaid debts plus interest and penalties. The tax authorities (IRS and states) will always attempt to collect taxes on forgiven debt and/or rental income. Keep in mind that the Mortgage Forgiveness Debt Relief Act ("MFDRA") provides a tax exemption for forgiven debt in certain circumstances. However, the MFDRA is set to expire December 31, 2012 unless the federal government renews the law. 

Wednesday, May 30, 2012

Got Questions? Get Answers...PA Seeks Direction In Order to Reduce His Anxiety

Got Questions?

[I] have read alot about it. I don't think i would qualify for a short sale as i have income, but bank only wants to lower interest for five years on a loan that is $100k underwater. I hate the abandoned neighborhood and the house is falling apart even though it was built in 2003. AZ is a non-recourse state.

I am current on 1st mortgage there is no second. I need to find somewhere to live.


2.) How long does "freddie Mac" (serviced by wells fargo) take to evict you once payments are stopped?

3.) should i occupy the home until evicted?

I am nervous, worried and frankly afraid. I am a disabled single dad with NO-ONE to help me. I am confused in spite of my reading about what to expect. Please respond as I am fairly desperate. I don't know if I have asked all the right questions or considered all of the possibilities yet. PLEASE HELP!

Sincerely, PA

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Monday, March 12, 2012

Got Questions? Get Answers...MRA Wants A Strategic Default Plan

Got Questions?

Hi. My husband and I are thinking about walking away from our home. We live in Illinois and purchased our home in 2005 for $157,000. In December of 2006 we got a 2nd mortgage HELOC of $18,000. Maxed that on credit card debt and medical bills. In January of 2010 I lost 10% of my pay because of the recession and my husband would work over time all year up until then too. So we lost all that money as well. We were very dependent of his OT. We fell behind on our 1st mortgage. The most was 3 months behind. Finally in November 2010 we got approved and accepted a loan modification on our 1st mortgage with BOA and our principal balance was lowered to $145,000 and the payments we were behind were forgiven. I never notified my 2nd bank HELOC or ever fell behind on payments with the 2nd loan. I am only paying the minimum interest payments. My 2nd loan is with my Credit Union that I have banked with for 20+ years (dont know if that matters). Oh and the loan they gave me as the HELOC, would need to be paid back by end of 10 years. Well that isn’t going to happen. So now I have fallen 1 month behind on my 1st mortgage with BOA. Still paying my 2nd on time. Have looked on to see that my home is currently worth on their website $91,700. It needs a ton of work not to mention. Needs a new kitchen as I think its the original kitchen from when the house was built in 1960. The bathroom is full of mold and the basement is 1/2 finished. And also, my husband and I have maxed out our credit cards AGAIN which is about $10,000 total. I need a new car as the one I have has 198k miles and my husband and I just purchased a used one last year that we still owe $5k on. We are thinking of just buying a new car for me and then just walking away. We don’t think it’s worth paying for something that is worth almost 1/2 of what we owe on it and not to mention the additional money it needs to fix it up. I'd like to actually pay off my credit cards when I walk away, but don’t know if just filing for bankruptcy for everything EXCEPT the cars would be best.

Can you help me? I so look forward to your advice.


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Friday, March 9, 2012

Think about the Endgame

There is a recent article in the Washington Post entitled A million-dollar mortgage goes unpaid for years while couple fights foreclosure. It is the story of a Maryland couple whom had not made a mortgage payment in over 5 years.
  • “The eviction from their million-dollar home could come at any moment. Keith and Janet Ritter have been bracing for it — and battling against it — almost from the moment they moved into the five-bedroom, 4,900-square-foot manse along the Potomac River in Fort Washington. In five years, they have never made a mortgage payment, a fact that amazes even the most seasoned veterans of the foreclosure crisis.  The Ritters have kept the sheriff at bay by repeatedly filing for bankruptcy and by exploiting changes in Maryland’s laws designed to help delinquent homeowners avoid foreclosure.”
From the news article we learn that the Ritters purchased their house for $1.29 million. The purchase involved a mortgage loan of $1 million. The monthly mortgage loan payment, at the time, was $7600 a month. So if the the Ritters did not make a $7600 monthly payment for 5 years, they essentially "earned" or saved or spent $456,000 ($7600 per month x 12 months x 5 years). The Ritter’s story raises several important issues for all people who are actively strategically defaulting. First. What do you do with the money saved from not paying a mortgage? Second. How do you keep the proper mindset/focus during a strategic default? Third. What your ultimate objective of a strategic default? Let’s look at the Ritter’s situation to see if we can “glean” their mindset and determine what they did with the $456,000 in additional savings and/or income.
  • “During the boom, they set out to become mini real estate moguls, buying properties and flipping them for a profit. In the process, Keith Ritter, 54, [became] a successful real estate investor and landlord with a six-figure income. Then, when the housing market tanked five years ago, the couple found themselves facing multiple foreclosures. The Ritters have tried to negotiate different payment arrangements with their lender to save their posh home near National Harbor, they said, but to no avail. 'It was never our intention to get here and never make a mortgage payment,' Keith Ritter said. 'We don’t believe in living for free.' But he and Janet, a 51-year-old real estate agent, make no apology for using every tactic available to them to stay in their house, including challenging the foreclosure sale in court, requesting mediation and claiming they had a tenant living with them…“When a bank does all it can to save itself, that’s good business,” Keith said. “When a homeowner does the same thing, he’s called a deadbeat.”

Sunday, March 4, 2012

Debt Defense 101: The Must Know Rules Of Debt Defense

The basic rules of Deficiency Debt Defense 101 are an ever growing list of MUST DO and MUST IMPLEMENT RIGHT NOW basic strategies in order to achieve the goal of deficiency debt defense.

Deficiency debt also known as debt deficiency arises when collateral that is used to secure a loan cannot satisfy the total amount due on the loan. It happens most often with debt involving real estate. However, it can occur in other types of collateralized loans such as car, business, and equipment loans. When a loan goes unpaid, the lender has the right to auction off the property to pay off the debt. If the lender collects less than what is owed at the sale, the shortage is called debt deficiency. A lender can turn a debt deficiency into a deficiency judgment. Please read What Everyone Should Know About Debt Forgiveness, Obligations and Deficiencies to learn more about debt deficiency and the consequences of a deficiency judgment.

The primary goals of deficiency debt defenses are to:

1. Reduce the Risk and Amount of Deficiency Debt.
2. Strengthen Your Defenses Against Deficiency Debt.
3. Lengthen The Time To Pay Back The Deficiency Debt.

A proper defense requires that you plan and prepare now. So make sure to implement all of these rules. Make sure you come back and read these rules every month. We will be adding new rules along the way. Also, each rule will be further detailed and expanded in future blog posts. We will do our best to apply each rule to a real life scenario.

In the meantime start reading and start preparing.

1. Do not ignore any legal papers. Always prepare a defense to every legal action. Always respond to a legal action in writing. It LENGTHENS the time and STRENGTHENS your defense 100% of the time.

2. Try to save every debt collection message with a live voice on your answering machine. Save messages that appear to be aggressive, intimidating, or threatening.  It may be useful if you need to prove a creditors improper tactics. Make sure you keep track of calls about your debts to other people or businesses.  There are creditors who may contact family, friends, or business associates. This must be stopped. You can use a cease and desist letter to try and put a stop to phone call communications. 

Wednesday, February 1, 2012

Strategic Default TV : A Local Arizona News Station Struggles (just a little) With Strategic Defaults

A local news station in Arizona,, portrays strategic defaults as if it is a new phenomenon. Many of our readers understand that there is nothing new about "strategic defaults". Despite a few of the negative statements made by the newscasters one thing is made clear: A properly planned and executed strategic default can improve the financial future for yourself, your family, and your business. 

In the end even the newscasters are unable (or unwilling) to seriously argue against a strategic default. The bottom line is that a strategic default will continue to evolve into a financial tool to preserve cash, savings, and wealth. 

One of the newscasters references a recent article on regarding the rise of strategic defaults. You can click here to read the article

The decision to strategically default should never be taken lightly. It requires serious consideration, careful planning, a team of knowledgeable professionals, a thorough understanding of the risks and rewards, and the confidence that it will place you in a better financial position. 

Knowledge is power.