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

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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,

JSW

 
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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. 

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. 

Consider Using A Mortgage Calculator, Amortization Table And Property Value Data For A Strategic Default

Part of our job at strategicdefault.org is to review other viewpoints about strategic default. This current post is inspired by another post we found while researching the universe of articles on strategic defaults and foreclosures.

We found this post entitled : “Should I Do a Strategic Default on my Mortgage?” by JLP in his blog All Financial Matters posted December 2, 2010.  

This question was posed by a reader of JLP's blog. The question and answer are as follows:

• "I bought my condo at precisely the wrong time. I didn’t, however, listen to everyone telling me I could afford to buy more. I did a straight 30 year fixed that I could afford in reality. Of course I am incredibly underwater on my mortgage now. It is depressing, needless to say, and even more so when I feel as if my taxes are helping people who didn’t “do things the right way” and some companies who seemed to have contributed greatly to the problem and are not being held responsible...I live in Illinois, western burbs of Chicago...I bought for $139,000, now owe $122,000 and the most recent sale was $77,000...30 year, 6.75% (which was good then!) percent...When I bought I planned on staying 5 years or so and moving up (didn’t everyone?). I don’t *need* to move. I sure wish I could buy some of the houses on the market now though! For what I paid? I bring home (after taxes) about $40,000 a year. My mortgage + PMI + escrow is almost $1,100...I know there are people in much worse shape. If I lost my job this whine about underwater wouldn’t even exist, you know? Still – just the though of paying even MORE out when I feel like I am not getting any benefit is upsetting, depressing."

         The writer, JLP answers as follows:

Happy New Year !!!!

Happy New Year. We all made it to 2011. Somehow, someway, to breath another day. 

The feeling of change in the beginning of a new year can be used to create a meaningful focus in our lives. For those of you who read our website...Thank You for visiting and taking time to read our content. 

We believe that your primary concern is how to strategically default the right way with the least financial and emotional impact. We believe you are seeking solutions to protect yourself, family, cash, savings, and wealth when deciding to not pay a debt. 

One thing is for certain in 2011, strategic defaults will continue to rise. Thus the demand (and need!) for solid, reliable, and actionable information will continue to be strong. 

We will be coming out with a new look and feel for our website. It will be easier to access our content based on categories and interest. We will be adding a strategic default calculator, forms, and other tools to better help you with a strategic default. We will continue to provide detailed steps for an effective strategic default. We will be adding a forum for our readers to share their experiences. Our goal is to continue to provide the best and free strategic default resource on the planet. 

We are predicting that the key issues for strategic default this year will be: 

Got Questions? Get Answers...AR Wants To Protect His Retirement

Got Questions?

Enjoyed your book, but it doesn't address retirees walking away from a home. What assets can a bank pursue if I'm retired & walking away from a home I own in NJ? I've been told retirement money (401K, pension, social security, bank accounts) are Teflon from all except the IRS. Is this accurate? Please clarify.

Thanks

AR

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